US Treasury Secretary Scott Bessent has publicly blamed the Commerce Department, led by Secretary Howard Lutnick, for failing to properly oversee the export of high-specification Nvidia chips. The criticism comes amid widening fallout from a scandal involving Nvidia CEO Jensen Huang, who departed the company after revelations of an affair with a former executive at Megaspeed, a firm suspected of smuggling advanced chips into China.
Megaspeed had been under investigation by US government agencies over suspicions it was diverting Nvidia’s advanced AI chips to China. According to the New York Times, the Commerce Department had been probing the firm for smuggling activities last year. Despite these investigations, Megaspeed was not added to the entity list, which restricts US companies from doing business with specific foreign entities.
What the Right Is Saying
Treasury Secretary Scott Bessent, speaking to CNBC, directed criticism at both the Commerce Department and Nvidia. Bessent stated that several agencies had recommended placing Megaspeed on the entity list for months. "But Commerce has the pen... and you will have to ask them about their internal process," Bessent said. He expressed frustration over delays in adding the company to the export control list and reports of AI chip leakage into China.
Bessent emphasized that President Trump had made it clear that China should not receive any Nvidia chips above the H100 model. "Any leakage is very frustrating because it hurts our great companies in the AI race, because it gives the Chinese an advantage," Bessent argued. He also pointed the finger at Nvidia, questioning whether the company knew its clients and whether there was a robust effort to prevent sales to what he described as "pass-through shell companies." Bessent stated that accountability is important for anyone at Nvidia involved in the leakage.
What the Left Is Saying
Democratic leaders on key congressional committees have launched investigations into how Nvidia was permitted to sell advanced AI chips to Chinese companies. House Ways and Means Committee Ranking Member Richard E. Neal and Senate Finance Committee Ranking Member Ron Wyden have requested all records from the Commerce Department and Secretary Lutnick regarding decisions to allow these sales, including communications involving Nvidia and Jensen Huang.
Neal and Wyden argue that the administration’s handling of the situation has compromised national security. They noted that Nvidia’s advanced H200 chips were allowed to be sold to Chinese firms if imported through the US for inspection, with a 25% tariff imposed under the Trade Act. This statute is intended to allow the president to act against imports that risk national security. "Trump's use of the statute appears to have done the opposite, undermining US national security and putting Americans at risk," the Democrats stated.
What the Numbers Show
The controversy centers on the export of Nvidia’s high-specification AI chips, specifically those above the H100 model. The H200 chips were reportedly sold to Chinese firms under a framework requiring importation through the US for inspection and the payment of a 25% tariff. This tariff is levied on the federal government under Section 232 of the Trade Expansion Act of 1962, which allows the president to restrict imports that threaten national security.
Megaspeed was the primary distributor in question. While the New York Times reported that the Commerce Department had been investigating Megaspeed for smuggling suspicions last year, the firm remained off the entity list. The Financial Times reported separate pressure on the Commerce Department to add Megaspeed to the list, but noted the department was delaying efforts to include the cloud computing firm. Senate Banking Committee Chairman Tim Scott, a Republican, posted on X that recent reports raise "serious concerns about our national security and the protection of sensitive US technology."
The Bottom Line
The scandal has led to high-profile congressional hearings. Jensen Huang has been summoned to testify before the Senate Banking Committee regarding his affair with the former Megaspeed executive, who is suspected of being a Chinese spy. Commerce Secretary Howard Lutnick is also scheduled to appear before the committee in December. The investigations by Neal and Wyden, along with the Senate Banking Committee hearings, aim to determine whether the Commerce Department’s delays in listing Megaspeed and Nvidia’s due diligence processes failed to protect US technological advantages in the AI race.
The situation highlights the tension between trade policy, national security, and corporate accountability. With the executive branch divided in its public messaging—Treasury blaming Commerce and both pointing to Nvidia—the outcome of the congressional inquiries will likely shape future export control policies for advanced semiconductor technology.