Nvidia Scandal Fallout: Treasury Secretary Blames Commerce Department

The scandal surrounding Nvidia's export controls has widened, with US Treasury Secretary Scott Bessent pointing the finger at the Commerce Department for failing to properly oversee the export of high-spec Nvidia chips. The controversy follows the departure of Nvidia CEO Jensen Huang after revelations of an affair with a former executive of Megaspeed, a firm suspected of being a front for Chinese espionage.

Bessent Criticizes Commerce Department

In an interview with CNBC, Bessent said that several agencies had been in favor of adding Megaspeed to the entity list for months, but the Commerce Department, led by Howard Lutnick, had delayed the process. "Commerce has the pen... and you will have to ask them about their internal process," he added. Bessent expressed frustration over the delay, stating that any leakage of AI chips to China undermines US national security and gives the Chinese an advantage in the AI race.

Pressure Mounts on Lutnick

Lutnick is facing growing pressure from both sides of politics to explain his department's actions. He has been called to testify before the Senate Banking Committee next month, and other congressional committees have requested that he and his department preserve all records related to Nvidia and Huang. The committee's chairman, Republican Senator Tim Scott, said on X that recent reports raise serious concerns about national security and the protection of sensitive US technology.

Nvidia Under Scrutiny

Bessent also criticized Nvidia, saying the real story should be whether the company knew its client and whether it made a robust effort to prevent leakage and avoid selling to pass-through shell companies. "It's important that anyone at the company there be held accountable for that," he said. Huang has been summoned to testify before the Senate Banking Committee about his affair with the former Megaspeed executive, who is suspected of being a Chinese spy.

Investigations by Democrats

Democrats on key congressional committees have also launched investigations into the Commerce Department's decisions regarding Nvidia's chip sales. Ways and Means Committee Ranking Member Richard E. Neal and Senate Finance Committee Ranking Member Ron Wyden are probing how Nvidia was allowed to sell its advanced H200 chips to Chinese firms. They argue that the chips could be sold to Chinese companies if they were first imported from Taiwan into the US for inspection, and that a 25% tariff was imposed under a section of the Trade Act meant to protect national security. "Trump's use of the statute appears to have done the opposite, undermining US national security and putting Americans at risk," they said.

The scandal has raised questions about the effectiveness of US export controls and the potential risks of advanced technology falling into the wrong hands. As the investigations continue, the pressure on both the Commerce Department and Nvidia is likely to intensify.