US Treasury Secretary Scott Bessent has publicly criticised the Commerce Department for failing to act against Megaspeed, a customer of chipmaker Nvidia that has been flagged by US officials over potential national security concerns.
The controversy surrounding Singapore-based data centre operator Megaspeed centres on allegations that it may have helped China gain access to advanced Nvidia artificial intelligence chips in violation of US export restrictions. US officials have suspected that the company could have diverted restricted semiconductors to Chinese entities, potentially giving Beijing access to technology that Washington considers strategically sensitive
Megaspeed, however, has strongly denied the allegations, describing itself as a “compliant and legal company” and stating that inspections by the US Commerce Department's Bureau of Industry and Security, Malaysian authorities and Nvidia found “no evidence of any violations concerning the illicit transfer of chips or any illegal activities”, as per Reuters. The company has also said that it is considering legal action over the allegations.
Questions raised over Lutnick's position
Deep Dive
Why is Megaspeed being considered for the US export control Entity List?
Which US departments supported adding Megaspeed to the export control list?
What does Megaspeed say about the allegations?
Speaking to CNBC on Friday, Bessent said several key departments within President Donald Trump's administration had supported placing Megaspeed on the US government's export blacklist. However, he suggested that the Commerce Department, headed by Howard Lutnick, had not taken the necessary steps to implement the proposal.
{{/usCountry}}Speaking to CNBC on Friday, Bessent said several key departments within President Donald Trump's administration had supported placing Megaspeed on the US government's export blacklist. However, he suggested that the Commerce Department, headed by Howard Lutnick, had not taken the necessary steps to implement the proposal.
{{/usCountry}}The remarks have brought an internal disagreement within the Trump administration into the public domain.
Bessent's criticism comes amid growing discussions among some of Trump's advisers about whether Lutnick should remain in his position as Commerce Secretary.
Citing people familiar with the discussions, CNN reported that concerns have intensified following the fallout surrounding Nvidia chief executive Jensen Huang's resignation. Several administration officials and external advisers have also contacted Trump to express their concerns about Lutnick's handling of the matter, as per CNN.
Despite the mounting criticism, the White House has publicly backed the Commerce Secretary. In a statement issued on Thursday, before Bessent's television appearance, the administration 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.”
Trump and Lutnick have a longstanding personal relationship, making the future of the Commerce Secretary uncertain. CNN sources familiar with the situation said it remains unclear whether the president will consider any changes to his administration.
Bessent says multiple departments supported action against Megaspeed
During his CNBC interview, Bessent said the Treasury Department, State Department, Pentagon and Office of the US Trade Representative were among the government bodies that favoured adding Megaspeed to the export control list.
He argued that responsibility for taking the formal decision rested with the Commerce Department.
"Commerce…has the pen. You would have to ask them about their internal processes," Bessent said.
He also stated that the department's failure to move forward was particularly frustrating because of Trump's stated position on restricting China's access to advanced American semiconductor technology.
"I am frustrated when President Trump made it very clear that China should not receive any Nvidia chips above A100s," he said, referring to Nvidia's A100 artificial intelligence processor.
Bessent added that any breach of those restrictions could undermine American competitiveness in the global artificial intelligence sector.
"And so any leakage is very frustrating because it hurts our great companies in the AI race, gives the Chinese an advantage," he said.
Why Megaspeed has come under scrutiny
US officials have been concerned for some time that Megaspeed may have helped channel advanced American-made semiconductor chips into China in ways that could violate US export restrictions.
Treasury officials have argued that the company should be placed on the Commerce Department's Entity List, a government register used to restrict exports to foreign companies considered potential national security risks.
The controversy has gained further prominence following reports concerning Nvidia chief executive Jensen Huang's alleged personal relationship with Alice Huang, a Megaspeed executive who has been suspected of having links to Chinese intelligence.
Senior Trump administration officials, including Lutnick, were informed several months ago about the relationship, as per CNN.
Despite these warnings and concerns surrounding the possible transfer of advanced technology to China, Commerce has not added Megaspeed to the Entity List, according to people familiar with the matter.
Tensions spilled into a Situation Room meeting
The disagreement between Bessent and Lutnick is also understood to have surfaced during a high-level meeting at the White House last week.
CNN had previously reported that Bessent confronted Lutnick during a tense Situation Room discussion over the Commerce Department's reluctance to designate Megaspeed as a national security concern.
According to people familiar with the meeting, Lutnick did not make an immediate commitment to take any particular action against the company.
Asked about the reported confrontation during his Friday interview, Bessent declined to discuss the details of the meeting.
"We don't repeat conversations in the Situation Room," he said.
US-China technology rivalry at the centre of the dispute
The dispute highlights the growing challenges facing the Trump administration as it attempts to protect America's lead in artificial intelligence and semiconductor technology while restricting China's access to advanced computing hardware.
Nvidia's chips are particularly important to the development of advanced AI systems, making their exports a sensitive issue in Washington's broader economic and national security strategy.