The political fallout from the Nvidia spy scandal has spread to President Donald Trump’s Cabinet, as Treasury Secretary Scott Bessent publicly blamed the Commerce Department for failing to blacklist a Singapore company suspected of funnelling powerful AI chips to China.
Bessent’s comments, a rare rebuke of one Cabinet department by another, put new pressure on Commerce Secretary Howard Lutnick. Lutnick has agreed to testify before the Senate amid questions over his department’s handling of export controls.
The scandal, which led Nvidia chief executive Jensen Huang to resign yesterday, has engulfed the company at the heart of the AI boom, a key driver of US economic growth.
It has raised concerns that high-end Nvidia chips reached China, the United States’ main AI rival, in violation of Washington’s export restrictions.
It has also prompted questions over whether senior Trump Administration officials turned a blind eye to Nvidia’s dealings with Chinese-linked companies.
Lutnick, a billionaire investor, is a close friend of Trump, who has made Huang one of his closest advisers on artificial intelligence.
As head of the department that oversees US export controls, Lutnick is ultimately responsible for enforcing the rules meant to keep advanced Nvidia processors out of Chinese hands.
Speaking on CNBC, Bessent said Treasury, the Defence Department, the US Trade Representative’s office and the State Department had backed adding the Singapore company, Megaspeed, to Washington’s trade blacklist “for months”.
“But Commerce has the pen,” Bessent said. “You will have to ask them about their internal processes.”
He said he was “frustrated” because Trump “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,” he said.
Lutnick is also facing pressure from Congress. Senator Jim Banks, an Indiana Republican, told Fox News he wanted Lutnick to testify before the Senate Banking Committee “ASAP”, citing “bipartisan questions and concerns about what’s happened over the last year”.
Lutnick has agreed to testify, Commerce Department spokesperson Kristen Eichamer told US media.
News outlet Axios had reported that Trump had approved action against suspected diversions of Nvidia chips to China on at least three occasions this year, but that Lutnick did not act on the requests.
Megaspeed is suspected of helping Chinese firms get around US export controls by buying Nvidia chips for its data centres in Southeast Asia and routing them to China.
The company reportedly traded more than US$4 billion worth of Nvidia chips over two years.
‘Know your client’
This week, US media identified Megaspeed’s former director, Alice Huang, as an alleged Chinese intelligence asset who had a relationship with Jensen Huang. The two are not related. Beijing has denied the spying allegations.
Jensen Huang acknowledged an extramarital affair in a November 8 letter to Nvidia employees that did not name the woman involved.
Nvidia’s board has said it will investigate, and three congressional committee chairs have asked Jensen Huang to attend a closed-door briefing in Washington on November 18.
Bessent said coverage of the affair had focused too much on Jensen Huang’s private life amid reports of other affairs with Nvidia colleagues.
“The story thus far has been on Jensen Huang’s personal foibles,” he said. “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 questioned whether Nvidia had been selling to “what were obviously pass-through shell companies”.
“I think it’s important that anyone at the company there be held accountable for that,” Bessent said. His comments suggest that scrutiny could extend to what Nvidia executives knew about the company’s customers.
He said there was “a lot of leakage in the system” and that the administration was “constantly working to close that down”.
- AFP