The widening controversy surrounding Nvidia's advanced artificial intelligence chips has escalated, with US Treasury Secretary Scott Bessent directly blaming Commerce Secretary Howard Lutnick's department for failing to blacklist Megaspeed International. Megaspeed, a Singapore-based company, is suspected of facilitating the diversion of restricted Nvidia AI chips to Chinese firms, bypassing stringent US export controls.
This development comes amid significant turmoil, including the departure of Nvidia's long-serving CEO, Jensen Huang, and mounting pressure on Lutnick within President Donald Trump's administration. Despite the White House affirming its confidence in Lutnick, Bessent's accusations highlight a deep inter-agency rift over the enforcement of national security policies.
Commerce Department Under Scrutiny Over Megaspeed
Secretary Bessent stated on Friday that multiple US agencies, including the Treasury Department, Pentagon, US Trade Representative's office, and the State Department, had supported placing Megaspeed on Washington's trade blacklist for months. However, the Commerce Department, which holds the authority to make such decisions, failed to act.
Reports from Axios indicate that Bessent directly confronted Lutnick during an Oval Office meeting regarding the inaction. The Entity List designation is crucial as it restricts companies considered national security risks from accessing American technology. The Wall Street Journal also reported that senior US officials and White House aides have criticized Lutnick's perceived close ties with Huang and his resistance to stronger restrictions on Nvidia chip sales to China.
Concerns Over AI Chip Leakage to China
Washington has implemented strict controls on the sale of advanced AI chips to China to prevent Beijing from enhancing its AI capabilities with US technology. Bessent expressed President Trump's frustration over the apparent "leakage" of these restricted chips.
"President Trump made it very clear that China should not receive any Nvidia chips above H100s," Bessent said, adding that any leakage undermines US companies and provides China with an advantage in the global AI race. He emphasized that the administration is continually working to close loopholes in the system.
Megaspeed's Alleged Role in Chip Diversion
Megaspeed International emerged as a significant customer for Nvidia's advanced AI chips, reportedly trading over $4 billion worth of processors in two years. It is suspected of acquiring these chips for data centers in Southeast Asia and then rerouting them to China.
Investigations into Nvidia's sales to Megaspeed began in 2024 by the Commerce Department's Bureau of Industry and Security, with the case later transferred to the Justice Department. The New York Times reported that a separate Commerce Department investigation was abruptly halted after Nvidia's intervention, raising further questions about the department's oversight.
Broader Implications and Congressional Scrutiny
The controversy has also brought personal allegations into the spotlight, including those involving Jensen Huang and Alice Huang, a former Megaspeed director identified as an alleged Chinese intelligence asset. While Jensen Huang admitted to an extramarital affair, Bessent stressed that the core issue remains national security and export control, not personal conduct.
Bessent questioned Nvidia's due diligence, asking, "Did Nvidia know their client, and was there a robust effort at Nvidia to make sure that there was no leakage?" He also raised concerns about Nvidia potentially selling chips to "obviously pass-through shell companies."
Lutnick's past ties to Nvidia are also under scrutiny, particularly his leadership of Cantor Fitzgerald, which held significant Nvidia shares when he was nominated to head the Commerce Department. Both Democratic and Republican senators, including Elizabeth Warren and John Kennedy, have demanded explanations from Lutnick and his department regarding their failure to address export-control loopholes. The House Foreign Affairs Committee and Senate Banking Committee are also seeking testimony from key officials involved.
Despite the intense pressure and bipartisan calls for accountability, the White House maintains its full confidence in Secretary Lutnick, who remains in office as investigations into Nvidia's customers and the alleged diversion of restricted AI chips continue.