U.S. Treasury Secretary Scott Bessent has questioned whether Nvidia knowingly sold advanced AI GPUs to shell companies acting as intermediaries for China, and called for accountability at the company, while declining to say whether CEO Jensen Huang knew of the practices.
In an interview with CNBC, Bessent acknowledged that U.S. export controls cannot prevent all restricted hardware from reaching China, which is how the country allegedly obtained millions of restricted AI GPUs from Nvidia.
"I think that there is a lot of leakage in the system, and we are constantly working to close that down," Bessent said. He added: "One thing here is that the story has been thus far on Jensen Huang's personal foibles. 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? And I think it is important that anyone at the company there be held accountable for that."
The Treasury Secretary criticized Nvidia's general counsel, Timothy Teter, who reportedly contacted the U.S. Department of Commerce to inquire about the detention of Megaspeed's Alice Wong in Singapore. Bessent said the general counsel "seems to have been very involved here, probably should have done more oversight rather than the haranguing [government officials at the U.S. DoC]."
Bessent declined to speculate about potential consequences for Nvidia if it turned out some executives knew customers were acting as intermediaries for Chinese entities, but expressed confidence that the company's board would conduct a thorough investigation. "But let us just say, if this was happening, then there were not robust controls at the company," he said.
The Treasury Secretary did not call for more stringent export restrictions or additional powers for government agencies, arguing instead that authorities should properly enforce existing regulations.
According to Bessent, the Departments of the Treasury, War, and State, as well as the Office of the U.S. Trade Representative, had supported adding Megaspeed to the Entity List for months. However, the authority to impose such export restrictions belongs to the Department of Commerce's Bureau of Industry and Security, which reportedly stalled efforts to blacklist Megaspeed as Commerce Secretary Howard Lutnick feared the move could worsen trade tensions with China.
Analysis
Why This Matters
- The U.S. Treasury Secretary is publicly questioning whether one of America's most valuable technology companies knowingly violated export controls, potentially exposing it to legal and financial consequences.
- The allegations involve millions of advanced AI GPUs reaching China through shell companies, which could undermine U.S. efforts to restrict adversaries' access to cutting-edge technology.
- The dispute highlights tensions within the U.S. government between enforcing export controls and avoiding trade escalation with China.
Background
Nvidia is the leading maker of AI training and inference GPUs, which are subject to U.S. export restrictions aimed at preventing China from obtaining advanced chips. In recent months, reports have alleged that Chinese entities obtained restricted Nvidia hardware through intermediaries, including the Singapore-based company Megaspeed. The U.S. Department of Commerce's Bureau of Industry and Security (BIS) is responsible for adding entities to the Entity List, which restricts exports to those entities.
Key Perspectives
Scott Bessent (U.S. Treasury Secretary): Says the real story is whether Nvidia knew its customers and had robust controls to prevent sales to pass-through shell companies. He calls for accountability at the company but does not know for a fact that CEO Jensen Huang knew of the practices.
Howard Lutnick (Commerce Secretary): According to Bessent, Lutnick stalled efforts to blacklist Megaspeed for months because he feared worsening trade tensions with China.
What to Watch
- Whether Nvidia's board conducts an investigation and what it finds regarding the company's knowledge and controls.
- Any action by BIS to add Megaspeed or other intermediaries to the Entity List.
- Potential bipartisan congressional pressure for stricter enforcement or new export control legislation.
Checked
12 claims in this story checked against 1 source: 12 supported.
Show each claim
- SupportedBessent questioned whether Nvidia knowingly sold advanced AI GPUs to shell companies acting as intermediaries for China.Latest from Tom's Hardware: “U.S. Treasury Secretary questions whether Nvidia knowingly sold AI GPUs to shell companies”
- SupportedBessent questioned the effectiveness of Nvidia’s internal controls.Latest from Tom's Hardware: “At the same time, he questioned the efficiency of Nvidia's internal controls.”
- SupportedBessent called for accountability at Nvidia.Latest from Tom's Hardware: “called for accountability at Nvidia”
- SupportedBessent declined to say whether CEO Jensen Huang knew about the potentially illicit practices.Latest from Tom's Hardware: “stressed that it was unclear whether Nvidia chief executive Jensen Huang knew about the potentially illicit practices.”
- SupportedBessent said, “I think that there is a lot of leakage in the system, and we are constantly working to close that down.”Latest from Tom's Hardware: “"I think that there is a lot of leakage in the system, and we are constantly working to close that down,"”
- SupportedBessent said the United States’ export controls cannot prevent all restricted hardware from reaching China.Latest from Tom's Hardware: “Bessent admitted that the U.S. export controls cannot prevent all the restricted hardware from reaching China or other adversaries”
- SupportedThe story says this is how China allegedly obtained millions of restricted AI GPUs from Nvidia.Latest from Tom's Hardware: “which is why the country allegedly obtained millions of restricted AI GPUs from Nvidia.”
- SupportedBessent said the story should ask whether Nvidia knew its client and whether it made a robust effort to prevent sales to pass-through shell companies.Latest from Tom's Hardware: “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”
- SupportedBessent said it was important that someone at the company be held accountable.Latest from Tom's Hardware: “And I think it is important that anyone at the company there be held accountable for that.”
- SupportedBessent criticized general counsel Timothy Teter, who reportedly contacted the Department of Commerce about the detention of Megaspeed’s Alice Wong in Singapore.Latest from Tom's Hardware: “Bessent also criticized Nvidia's general counsel Timothy Teter, who reportedly contacted the U.S. Department of Commerce to inquire whether U.S. authorities were behind the detention of Megaspeed's Alice Wong in Singapore.”
- SupportedBessent said the general counsel “seems to have been very involved here” and should probably have done more oversight rather than “the haranguing [government officials at the U.S. DoC].”Latest from Tom's Hardware: “The [general council] seems to have been very involved here, probably should have done more oversight rather than the haranguing [government officials at the U.S. DoC].”
- SupportedBessent said the Treasury, War and State departments and the Office of the U.S. Trade Representative had supported adding Megaspeed to the Entity List for months; Commerce’s Bureau of Industry and Security had the authority and reportedly stalled the effort amid Howard Lutnick’s concern about trade tensions with China.Latest from Tom's Hardware: “had supported the addition of Megaspeed to the Entity List for months. However, the authority to impose such export restrictions belongs to the Department of Commerce's Bureau of Industry and Security (BIS), which reportedly stalled efforts to blacklist Megaspeed for months as Commerce Secretary Howard Lutnick feared that the move could worsen trade tensions with China.”
