Treasury Secretary Bessent Blames Commerce Department for Nvidia Chip Leakage to China

What Happened

Treasury Secretary Scott Bessent publicly criticized Commerce Secretary Howard Lutnick on Friday, November 13, 2026, accusing the Commerce Department of failing to regulate the export of high-specification Nvidia AI chips to China. The friction follows the removal of Nvidia CEO Jensen Huang, who was ousted after an affair with a former executive at Megaspeed, a firm suspected of acting as a conduit for smuggling advanced semiconductors into Chinese territory. Bessent stated to CNBC that while multiple agencies advocated for placing Megaspeed on the entity list months ago, the Commerce Department held the final authority and failed to act. This administrative breakdown occurs as the U.S. government faces scrutiny over the unauthorized transit of H200-class chips through Taiwan-based manufacturing facilities into the United States before being rerouted to Chinese entities.

What the Evidence Establishes

Records indicate that Megaspeed, a cloud computing firm, has been under investigation by U.S. agencies for suspected smuggling operations involving Nvidia's advanced AI hardware. Despite these investigations, Megaspeed does not currently appear on the official U.S. restricted entity list. Treasury Secretary Bessent confirmed that the administration's directive, established by President Trump, explicitly prohibited the sale of any Nvidia chips exceeding the H100 specification to China. However, the current loophole allows for chips to be imported into the U.S. from Taiwan, subjected to a 25% tariff under the Trade Act, and then potentially diverted. Congressional leaders, including Senator Tim Scott, have officially noted that these incidents raise direct concerns regarding the protection of sensitive U.S. technological assets and broader national security protocols.

Where the Accounts Conflict

A significant discrepancy exists between the Treasury Department's assessment of the crisis and the Commerce Department's execution of export policy. Bessent characterized the delay in blacklisting Megaspeed as a failure of the Commerce Department's internal processes, suggesting that the 'pen'—the final decision-making power—was held by Lutnick's team. Conversely, the Commerce Department has not provided a definitive justification for the delay, though reports from the Financial Times suggest the department was actively stalling efforts to include Megaspeed on the restricted list. Additionally, while the scandal is often framed through the lens of Jensen Huang's personal conduct, Bessent argues the core issue is corporate accountability and the failure of Nvidia to verify if its clients were using pass-through shell companies to bypass federal restrictions.

Context and Stakes

The political stakes involve a looming confrontation in the Senate. Commerce Secretary Howard Lutnick has been summoned to testify before the Senate Banking Committee in December to explain the department's oversight failures. Simultaneously, Jensen Huang is expected to appear before the same committee regarding his connection to the Megaspeed executive and the subsequent security breaches. The financial and strategic implications are severe; the leakage of high-end AI hardware provides Chinese technological competitors with a direct advantage in the global AI race. Furthermore, Ways and Means Committee Ranking Member Richard E. Neal and Senate Finance Committee Ranking Member Ron Wyden have launched investigations into the misuse of the Trade Act, claiming that the current application of tariffs has undermined rather than protected U.S. national security interests.

What to Watch Next

The immediate focus shifts to the Senate Banking Committee hearings scheduled for next month. Observers should monitor whether the Commerce Department releases internal communications regarding Megaspeed, as both Lutnick and his department have been ordered by various congressional committees to retain all records related to Nvidia's sales. The specific details of these communications will determine if the delay in blacklisting was a procedural error or a deliberate policy choice. Additionally, the investigation by the Ways and Means and Senate Finance committees will likely probe the efficacy of the 25% tariff on Taiwanese-manufactured chips. Any move by the Treasury to bypass Commerce and initiate direct export restrictions through executive order would signal a total breakdown in inter-agency cooperation.

Bottom Line

The Nvidia scandal has evolved from a corporate leadership crisis into a high-level cabinet dispute with profound national security implications. The failure to prevent high-spec AI chips from reaching China via Megaspeed has exposed vulnerabilities in the U.S. export control framework and the implementation of the Trade Act. With Treasury Secretary Bessent pointing the finger at Commerce Secretary Lutnick, the administration faces an internal struggle over how to manage technological competition with China. The upcoming Senate testimonies will serve as the primary mechanism for determining whether this was a failure of corporate due diligence by Nvidia or a systemic regulatory failure by the Commerce Department.