Scott Bessent, the United States Treasury Secretary, has publicly accused the Commerce Department of stonewalling a multi-agency push to blacklist a Singaporean data centre operator with alleged ties to Chinese intelligence, exposing a widening fracture in the administration’s technology war with Beijing. The extraordinary rebuke, delivered on CNBC on Friday, came less than 24 hours after Nvidia’s co-founder Jensen Huang resigned amid revelations of a personal relationship with the executive at the centre of the controversy.
A Fractured Front on Export Controls
For months, the Treasury, Defence and State Departments, alongside the Office of the United States Trade Representative, have advocated placing Megaspeed on the Commerce Department’s Entity List — the government’s most potent tool for restricting technology transfers to adversaries. Yet the designation never materialised. “Commerce has the pen,” Bessent told the network, his frustration palpable. “You will have to ask them about their internal processes.”
The Treasury chief revealed that his deputy had been pressing the case at the deputies’ level for months, only to be stalled by a bureaucracy that appears increasingly captured by the very industry it is meant to police. At a recent inter-agency meeting, Jeffrey Kessler, the Commerce under secretary responsible for export administration, reportedly deferred any decision to Secretary Howard Lutnick, effectively freezing the process.
The Nvidia Connection
The scandal has already claimed its most prominent corporate scalp. Jensen Huang stepped down as Nvidia’s chief executive on Thursday following reports that he maintained a personal relationship with Alice Huang, the woman leading Megaspeed. US intelligence agencies have assessed Alice Huang as an asset for the Chinese government, a designation that transforms a corporate governance issue into a matter of national security.
Megaspeed’s business model exploited a critical loophole in American export controls. The firm purchased advanced Nvidia semiconductors to build data centres across Southeast Asia — facilities that, while legally located outside China, serviced Chinese clients hungry for the computing power required to train advanced artificial intelligence models. Investigators are also probing whether Megaspeed smuggled a portion of those chips directly into the People’s Republic, a violation that would carry severe criminal penalties.
“There is a lot of leakage in the system, and we are constantly working to close that down,” Bessent said. But his pointed follow-up suggested the Treasury believes the problem extends beyond porous borders. “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?”
Lutnick’s Resistance
Howard Lutnick, the Commerce Secretary, has spent recent months arguing for a “surgical” approach to technology restrictions, resisting the sweeping bans favoured by defence hawks and China hardliners on Capitol Hill. Critics inside the administration and in Congress have long whispered that his caution stems from an uncomfortably close relationship with Nvidia and its former chief.
Last week, according to officials briefed on the exchange, Bessent confronted Lutnick directly, demanding to know why the Entity List designation had not been executed. Lutnick reportedly pledged swift action. A Commerce Department spokeswoman subsequently denied the confrontation took place, insisting that Entity List decisions are “an administration-wide” consensus.
The denial does little to paper over the cracks. With the Treasury Secretary effectively accusing a cabinet colleague of dereliction of duty, and a flagship American chipmaker in leadership turmoil, the administration’s credibility on technology security is on the line.
Why it Matters
The Megaspeed affair reveals the fatal flaw in America’s attempt to choke off China’s AI ambitions: the system relies on voluntary compliance from companies that profit from the very loopholes the government is trying to close. If Nvidia — the single most important supplier of AI hardware — failed to vet a client flagged by intelligence agencies, and if the Commerce Department slow-walked enforcement to protect commercial relationships, then the entire architecture of export controls is compromised. Congress will now demand answers, and the next round of restrictions will be written with far less industry input and far more statutory teeth.
