The Nvidia scandal has now cracked open President Donald Trump’s Cabinet. Long-simmering tensions between Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick burst into public view Friday, NBC News reported, as Bessent blamed the Commerce Department for failing to keep advanced AI chips out of China’s reach.
Lutnick, meanwhile, has agreed to testify. His spokesperson says he will appear voluntarily before the Senate Banking Committee, which has asked him to come before it on Dec. 10 for a public hearing.
“Commerce has the pen”
Speaking on CNBC’s “Squawk Box” on Friday, Bessent said several parts of the administration had wanted to restrict Megaspeed International, the Singapore-based company at the center of the scandal, for a long time.
“Treasury, War, [the U.S. Trade Representative] and State, they were in favor of putting Megaspeed on the Entity List for months, but Commerce has the pen. And you will have to ask them about their internal processes.”
Treasury Secretary Scott Bessent, as quoted by CBS News
Being added to the Entity List would have restricted Megaspeed’s ability to get access to advanced AI chips, CBS News reported. The company was previously led by Alice Huang, the suspected Chinese spy who had an affair with former Nvidia CEO Jensen Huang, and the U.S. government suspects Megaspeed of directing advanced Nvidia chips to China in violation of a U.S. export ban.
Asked whether he was frustrated by the delays, Bessent didn’t hide it. “I am frustrated when President Trump made it very clear that China should not receive any Nvidia chips above H100s,” he said, according to CNBC. “Any leakage is very frustrating,” he added, because it “hurts our great companies in the AI race [and] gives the Chinese an advantage.”
Asked whether Nvidia’s top processors had reached China with Megaspeed as a pass-through, he said: “I think that there is a lot of leakage in the system, and we are constantly working to close that down.”
The Situation Room clash that wasn’t
Bessent’s comments came after an Axios report that he had confronted Lutnick in the White House Situation Room last week, asking why he had resisted putting export controls in place, especially on Megaspeed. Axios reported that Lutnick has “repeatedly stood in the way” of cracking down on companies suspected of diverting Nvidia’s advanced AI chips to China, according to CNBC.
Commerce Department spokeswoman Kristen Eichamer told CNBC that the two men had “no such conversation” in the Situation Room. Asked about it on air, Bessent didn’t deny it: “We don’t repeat conversations in the Situation Room.”
Bessent declined to comment on the reported tensions between himself and Lutnick, CBS News reported. The Commerce Department did not respond to requests for comment from CNBC or CBS News on Bessent’s remarks.
Bessent: “The real story” is what Nvidia knew
Bessent also turned the spotlight on Nvidia itself. “The story has been thus far on Jensen Huang’s personal foibles,” he told CNBC. “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?”
“I think it’s important that anyone at the company there be held accountable for that,” he said. Nvidia has said it complies with U.S. export laws, according to NBC News.
Huang had pushed the government to ease restrictions on exporting advanced AI chips to China, CNBC reported. Last December, Trump said Nvidia could sell its powerful H200 chips to approved Chinese customers, as long as the U.S. got a percentage of the sales.
Lutnick heads to the Hill
Senate Banking Committee Chairman Tim Scott, R-S.C., sent letters Thursday asking Lutnick and Huang to appear voluntarily, on Dec. 10 and Dec. 3 respectively, NBC News reported. Scott asked Lutnick to testify at “a public hearing regarding recent public reports about Nvidia and the Department of Commerce’s role that raises national security concerns.”
“Secretary Lutnick has proactively agreed to appear voluntarily before the Banking Committee to address their questions,” Eichamer told NBC News.
The pressure is coming from both parties. Sen. Jim Banks, R-Ind., told Fox News that “we know that the Department of Commerce, Secretary Lutnick, it appears, used loopholes to allow some of these chip sales to occur even though President Trump has directed his administration and the Department of Commerce not to allow that to happen,” CBS News reported.
Sen. Richard Blumenthal, D-Conn., said that if Lutnick didn’t come voluntarily, “he may need to be subpoenaed,” and that one thing he wants to know is, “were export controls relaxed?” Sen. Elizabeth Warren, D-Mass., said Lutnick needs to “explain why they have not closed export control loopholes and act today to ensure our advanced technology is not fueling China’s military.”
Some Republicans don’t want to wait until December. “Come here before Thanksgiving. Give us the facts,” Sen. Thom Tillis, R-N.C., said, according to NBC News.
Lutnick isn’t the only Commerce official being called in. House Foreign Affairs Chairman Brian Mast, R-Fla., asked Jeff Kessler, Commerce’s under secretary for industry and security, to appear on Dec. 3 for a hearing on “chip smuggling, adversary military use of advanced AI chips, reported interference by private companies into export control policy and enforcement investigations,” CNBC reported.
The White House has stood by Lutnick, saying in a statement that the president “maintains complete confidence in the secretary and his ability to carry out the position as the most transformative Commerce Secretary in modern history,” according to NBC News.
A political problem Trump would rather avoid
The Washington Post reported that the scandal ties together the very issues that propelled Democrats to their largest congressional majority since 1990, from worries about AI and competition with China to special access and favors for billionaires.
Rep. Stephen F. Lynch, D-Mass., told the Post that the House Oversight Committee will examine why Lutnick declined to blacklist companies suspected of smuggling advanced Nvidia chips to China, and why Trump kept talking to Huang and bringing him on Air Force One. “We really want to get to the bottom of this,” Lynch said.
Trump, for his part, doesn’t plan to bring the scandal up when he travels to China next week. The president is taking Elon Musk on his trip to the Philippines and China, the Associated Press reported, but he plans to avoid talking about the Nvidia scandal. “The situation with Nvidia should not really have any bearing on the trip,” a senior official told reporters, according to CNBC. “I don’t expect the president to raise it — the Alice Huang issue,” another official said.
What happens next
- Dec. 1: Huang has been asked to sit for a closed-door briefing with the House committees on China, intelligence and foreign affairs.
- Dec. 3: Senate Banking has asked Huang to appear, and Commerce’s Jeff Kessler has been asked to appear before House Foreign Affairs.
- Dec. 10: Lutnick is set to face the Senate Banking Committee.
For now, the Treasury secretary has made his position clear in public: other agencies wanted Megaspeed restricted for months, and Commerce held the pen. Lutnick will get his chance to answer in front of senators of both parties.