Nvidia chip row escalates: Bessent throws Howard Lutnick under the bus over Megaspeed; here's why

The widening Nvidia scandal has shaken Silicon Valley, ended Jensen Huang's more than three-decade tenure at the chipmaker and placed US Commerce Secretary Howard Lutnick under pressure within President Donald Trump's administration.

US Treasury Secretary Scott Bessent has blamed Lutnick's department for failing to blacklist Megaspeed International, a Singapore-based company suspected of helping Chinese firms bypass US export restrictions on advanced Nvidia artificial intelligence chips. The White House, however, said Trump continues to have complete confidence in Lutnick.

Bessent questions Commerce Department over Megaspeed

Bessent said on Friday that the Treasury Department, Pentagon, US Trade Representative's office and State Department had supported placing Megaspeed on Washington's trade blacklist "for months", but no decision was taken.

"But Commerce has the pen. You will have to ask them about their internal processes," Bessent told CNBC.

Axios earlier reported that Bessent confronted Lutnick during an Oval Office meeting over the failure to place Megaspeed on the Entity List, which restricts companies considered national security or foreign policy risks from accessing American technology.

According to The Wall Street Journal, senior US officials and White House aides have criticised Lutnick's ties with Huang and his resistance to efforts to restrict Nvidia chip sales to Chinese buyers. Some Trump allies have reportedly raised the possibility of removing Lutnick from the Commerce Department.

Bessent flags leakage of restricted AI chips

Washington has imposed strict controls on advanced AI chips sold to China. Bessent said Trump had made the limits clear and was "frustrated" because the President "made it very clear that China should not receive any Nvidia chips above H100s".

"Any leakage is very frustrating because it hurts our great companies, and in the AI race gives the Chinese an advantage," Bessent said. He added that the wider system had suffered from "a lot of leakage" and that the administration was "constantly working to close that down".

The restrictions seek to prevent China from obtaining advanced computing technology that could strengthen its AI capabilities. The suspected movement of restricted chips through intermediaries has raised questions about US enforcement.

Megaspeed's role in Nvidia chip controversy

Megaspeed emerged as a major Nvidia customer for advanced AI chips. It is suspected of buying processors for data centres in Southeast Asia and allegedly routing them to China. Reports said it traded more than USD 4 billion worth of Nvidia chips over two years.

CBS News reported that the Commerce Department's Bureau of Industry and Security opened an investigation in 2024 into Nvidia's sales to Megaspeed to determine whether the processors were being redirected to China. The case was later transferred to the Justice Department. The New York Times reported that a separate Commerce Department investigation was abruptly halted after Nvidia intervened.

The handling of the case has brought criticism of Lutnick and Jeffrey Kessler, the Commerce Department undersecretary who oversees the bureau.

Personal allegations widen Nvidia scandal

The controversy has also drawn attention to allegations involving Huang and Alice Huang, a former Megaspeed director identified as an alleged Chinese intelligence asset. The two, who are not related, were reported to have had a relationship.

The New York Times reported that Jensen Huang had an affair with Kimberly Powell, Nvidia's vice-president of healthcare and his subordinate. Reuters later reported that he had an intimate relationship with another Nvidia employee who has not been publicly identified.

Huang admitted to an extramarital affair in a November 8 letter to employees but did not identify the woman. He stepped down as Nvidia's chief executive and from its board on Thursday.

Bessent said the personal allegations risked distracting from national security and export-control issues. "The real story here should be: Did Nvidia know their client, and was there a robust effort at Nvidia to make sure that there was no leakage," he said.

He also questioned whether Nvidia had sold chips to "what were obviously pass-through shell companies", adding: "I think it's important that anyone at the company there be held accountable for that."

Lutnick's Nvidia ties face scrutiny

CBS News reported that Lutnick previously led financial services company Cantor Fitzgerald, which held about USD 1.2 billion worth of Nvidia shares when he was nominated to head the Commerce Department.

Scrutiny of his handling of Nvidia's China-related business has extended to both parties in Congress. Democratic Senator Elizabeth Warren has asked Lutnick and Kessler to explain why the department failed to close export-control loopholes. Republican Senator John Kennedy has questioned how advanced US chips reached companies suspected of links to China.

The House Foreign Affairs Committee has sought testimony from Kessler. Senate Banking Committee chairman Tim Scott has asked Lutnick and Huang to testify, with subpoenas possible if they do not cooperate. NBC News reported that Lutnick had agreed to appear voluntarily.

Trump continues to back Lutnick

The pressure has not prompted White House action. In a statement issued before Bessent's remarks, the White House said Trump "maintains complete confidence in the secretary and his ability to carry out the position as the most transformative Commerce Secretary in modern history".

Lutnick remains in office with Trump's backing but faces questions over why Megaspeed was not blacklisted despite support from several US agencies. Investigations into Nvidia's customers and the suspected diversion of restricted AI chips continue.