Treasury Secretary Questions Nvidia's Controls Over AI Chip Exports to China

U.S. Treasury Secretary Scott Bessent publicly questioned whether Nvidia maintained adequate internal controls to prevent its restricted AI processors from reaching China through shell companies, shifting scrutiny from the company's former chief executive to its corporate compliance systems.

In a CNBC interview, Bessent acknowledged that existing export controls cannot stop all restricted hardware from reaching adversaries. But he argued Washington does not need new restrictions or expanded enforcement powers — instead, authorities should properly enforce current rules while chipmakers ensure their own vetting prevents shipments to obvious pass-through entities [1][2].

Bessent 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 and that they were selling to what were obviously pass-through shell companies?" He added: "But let us just say, if this was happening, then there were not robust controls at the company" [1].

Focus on legal leadership

Bessent directed particular criticism at Timothy Teter, Nvidia's general counsel. Teter reportedly contacted the Commerce Department to ask whether U.S. authorities were behind the detention of a Megaspeed executive in Singapore. Sources differ on the executive's name: Yahoo Finance and Silicon Report identify her as Alice Wong [1][2], while CNBC identifies her as Alice Huang [3]. Bessent said Teter "probably should have done more oversight rather than the haranguing [government officials at the U.S. DoC]" [1].

The New York Times reported that Teter told Commerce investigators probing Megaspeed he had been in touch with Jeffrey Kessler, head of the Bureau of Industry and Security (BIS). The Megaspeed investigation — which allegedly involves smuggling restricted chips to China — was subsequently transferred to the Justice Department [2][3].

Bessent declined to speculate on potential consequences for Nvidia if executives knowingly sold to Chinese intermediaries, and said it was unclear whether former CEO Jensen Huang knew of any illicit practices. He expressed confidence Nvidia's board would conduct a thorough investigation [1][2].

Inter-agency tension over Megaspeed

Bessent revealed that the Departments of the Treasury, War, and State, plus the Office of the U.S. Trade Representative, had supported adding Megaspeed to the Entity List for months. ("War Department" is the pre-1947 name for the Department of Defense.) But Commerce Secretary Howard Lutnick reportedly stalled the move, fearing it would worsen trade tensions with China [1][2].

The Entity List designation would have restricted Megaspeed's access to U.S. technology. Lutnick's Commerce Department oversees BIS, which administers export controls. The reported stall highlights a split between agencies favoring stricter enforcement and Commerce's concern for diplomatic fallout.

Huang's resignation and congressional fallout

The compliance questions come after Huang resigned as Nvidia CEO on November 12 following disclosures of an affair with a woman identified as Alice Huang, an executive at Megaspeed and alleged Chinese spy [3]. Huang co-founded Nvidia [3].

Congressional investigations are moving quickly. Senate Banking Committee Chair Tim Scott (R-S.C.) summoned both Huang and Lutnick to testify in December; Lutnick agreed to appear voluntarily [2][3]. Sen. Elizabeth Warren (D-Mass.) and Sen. Chris Coons (D-Del.) sent a letter instructing cabinet officials to preserve all communications related to Nvidia's exports of advanced AI chips to China or entities that might divert them there [3].

In the House, Foreign Affairs Committee Chair Brian Mast (R-Fla.) is negotiating for Huang to testify under oath in the coming weeks, potentially before Thanksgiving, alongside Intelligence Committee Chair Rick Crawford (R-Ark.) and Select China Committee Chair John Moolenaar (R-Mich.) [3]. Mast said he would subpoena Huang if he does not appear willingly.

What remains unknown

Several critical questions are unresolved. It is not known whether Nvidia executives were aware that specific customers acted as intermediaries for Chinese entities. The full extent of any chip diversion through Megaspeed or other channels has not been publicly quantified. Bessent cited reports that China allegedly obtained millions of restricted AI GPUs from Nvidia [1][2].

The Justice Department has taken over the investigation into Megaspeed. Whether Nvidia's board will launch an independent review, and what access investigators will have to internal communications, remains to be seen.