Megaspeed Not Blacklisted by Commerce Department Amid Nvidia Scandal

The Commerce Department is facing growing pressure from its fellow Cabinet members over Secretary Howard Lutnick's decision not to blacklist Megaspeed, a cloud computing company at the center of a high-profile scandal involving Nvidia and an alleged Chinese spy.

According to Treasury Secretary Scott Bessent, there was significant coordination among federal agencies in favor of placing trade restrictions on Megaspeed for months. However, the final decision ultimately rested with Lutnick's department.

Bessent made these remarks during a recent interview, noting that Commerce has the authority to make such decisions. When asked about his own role in the process, Bessent suggested that he was not responsible for determining which entities should be placed on the entity list.

Megaspeed is currently under investigation by the Justice Department over allegations that it violated U.S. export controls by shipping Nvidia chips to China. The company's Malaysian subsidiary, Speedmatric, shipped at least $7.5 billion in chips to China over a two-year period.

Reports have also emerged suggesting that Lutnick took action to protect Nvidia from the Trump administration's export controls on U.S.-made AI hardware destined for China. Bessent was reportedly so concerned about this development that he confronted Lutnick in the Situation Room following the midterm elections, according to Axios.

The controversy surrounding Nvidia's advanced AI chips continues to grow as senior White House officials consider ousting Commerce Secretary Howard Lutnick from his position. This move comes after it was revealed that Lutnick failed to add 100 companies, including China's DeekSeek, to the entity list despite being given months to do so by Treasury officials.

According to reports, Lutnick's top deputy Jeff Kessler spoke out against cancelling a $7 billion deal with Oracle to lease chips to Chinese tech conglomerate Tencent. This decision would have halted the shipment of 100,000 advanced Nvidia AI chips, and Lutnick was reportedly at odds with Treasury officials over the cancellation.

The Commerce Department has yet to respond to Fortune's request for comment on this matter. Meanwhile, lawmakers from both parties are calling for accountability from Lutnick, questioning why he chose to sell advanced chips despite national security concerns.

Lutnick is set to testify alongside Huang before the Senate Banking Committee on December 10 to address these concerns. The fallout from Nvidia's involvement with Megaspeed and its ties to China continues to widen, with senior White House officials weighing whether to remove Lutnick from his position as Commerce Secretary.

Senior officials within the Treasury Department had been pushing for months to blacklist Megaspeed, a US-based chipmaker accused of ties to China, citing concerns about favoritism toward Nvidia, a major tech company.

The Commerce Secretary's close relationship with Nvidia and his financial ties to the company have raised eyebrows, particularly given his position as chief regulator. Huang, who has praised Lutnick's industry expertise, had described him as a key contact within the administration.