Commerce Secretary Howard Lutnick has repeatedly stalled President Trump’s efforts to restrict the sale of advanced Nvidia artificial intelligence chips to China, even as the administration grapples with an espionage scandal involving a key Nvidia customer.
Internal friction has reached a boiling point, with senior cabinet members challenging the Commerce Department’s reluctance to enforce national security tools against firms suspected of funneling technology to Beijing.
Situation Room Confrontation Over Megaspeed
During a tense meeting in the White House Situation Room on November 5, Treasury Secretary Scott Bessent confronted Lutnick regarding his department’s refusal to blacklist Megaspeed, a Singapore-based firm suspected of illegally diverting American technology to China.
The confrontation included Defense Secretary Pete Hegseth, U.S. Trade Representative Jamieson Greer, and National Security Adviser and Secretary of State Marco Rubio. While these officials pushed for immediate action, Lutnick and Commerce Undersecretary Jeffrey Kessler resisted the pressure to move forward.
When pressed by colleagues to act, Lutnick remarked, “I need to check with the president,” a response that frustrated other cabinet members who believed the decision to impose controls had already been settled.
One official present at the meeting later described the interaction, noting, “He’s stalling it out,” according to reporting by Axios. Bessent also questioned Lutnick on why his department has resisted implementing export controls, particularly given that the Commerce Department has not added a new company to the entity list in 13 months.
Trump Authorizes Crackdown After Consulting Elon Musk
The group eventually moved the discussion to the Oval Office, where President Trump consulted with tech advisor Elon Musk before authorizing the crackdown. Despite the President’s directive to “Let’s get it done,” Lutnick warned that the action “will start a trade war with China.” When challenged by others who argued that China was already engaging in the very behavior Lutnick feared, the Commerce Secretary continued to propose new delays.
The standoff follows reports that Megaspeed, originally incorporated in 2015 as a Chinese video game developer, has purchased more than $4.8 billion in Nvidia chips since mid-2024. The company is currently at the center of an espionage scandal involving Nvidia CEO Jensen Huang’s relationship with Alice Huang, a Megaspeed executive identified by U.S. intelligence as a potential Chinese spy.
Senior officials were briefed on this relationship in May through a highly classified memo, yet the Commerce Department has refused to place the firm on the entity list.
Senator Kennedy Demands Answers as Nvidia Value Drops
The controversy has triggered a wave of concern on Capitol Hill. Sen. John Kennedy (R-La.) demanded answers regarding why the department chose to sell advanced chips, stating, “Secretary Lutnick needs to answer that in front of God and country.” Kennedy suggested that a congressional investigation is inevitable, noting that Lutnick should not wait for the legislature to act before explaining his department’s decisions.
Uncertain export policy has caused Nvidia's market value to drop by approximately $700 billion during November. Investors are closely monitoring the Commerce Department’s frozen entity list, which has not seen a new addition since October 9, 2025. While the administration previously agreed to allow sales of Nvidia’s H200 chips in exchange for a 25% tariff, the current standoff over Megaspeed suggests the policy remains a point of contention.
- Nvidia shares rose 2.7% to $173.29 early Wednesday, even as the firm faces ongoing scrutiny over its China-market strategy.
- Former Commerce official Kevin Kurland said that current trade policy is “overshadowing the use of a critical national security tool.”
- A Commerce Department spokeswoman denied the Situation Room confrontation took place, stating that entity list decisions are administration-wide.
With the trade truce set to expire on January 10, 2027, the administration remains divided on whether to prioritize the containment of Chinese technological advancement or the maintenance of existing trade ties. As of now, Megaspeed denies any wrongdoing, describing itself as a compliant company.
