Commerce Dept. Chip Inquiry Was Halted After Nvidia Intervention

The U.S. Commerce Department paused its inquiry into Megaspeed International, a Singapore-based data center operator suspected of routing advanced Nvidia AI hardware to China, after Nvidia intervened, according to reports from multiple outlets including BigGo Finance and Investing.com. The transfer to the Justice Department for a criminal investigation occurred following an email from Nvidia's general counsel, Tim Teter, to Commerce investigators in August 2025. In that message, Teter stated that Jeff Kessler, a senior Commerce official who oversees export-control operations and reports directly to Secretary Howard Lutnick, had cleared him to reach out to investigators. The mention of Kessler unsettled the investigators, who turned down Nvidia's request for a meeting. After the email chain reached Kessler, he instructed the team to continue working the case strictly by the book without ordering them to share information with Nvidia or alter any investigative decisions, according to a Commerce official cited in the New York Times report. Even so, the exchange prompted internal discussions at Commerce about potential conflicts of interest, leading the Justice Department to request that Commerce pause its work and hand over the case. Federal prosecutors are now running a criminal investigation into Megaspeed. The handoff was notable because Commerce investigators had spent months assembling the case and could have sought administrative penalties, including restrictions on the company's access to U.S. technology. Megaspeed had brought billions of dollars of Nvidia AI equipment into Malaysia while building data centers across Southeast Asia to serve Chinese clients, among them Alibaba Group Holding Ltd. Serving Chinese customers from overseas sites is not in itself unlawful, but U.S. authorities suspected some of the chips were being diverted into China illegally. The matter has drawn renewed attention since reports that Alice Huang, a Megaspeed executive, was believed by U.S. intelligence officials to be working for the Chinese government and had a personal relationship with Nvidia CEO Jensen Huang. Nvidia said its board had opened an investigation into that relationship and into whether the chief executive was the target of a foreign intelligence effort. Nvidia has defended its dealings with the government, saying it routinely shares information gathered from the field, seeks guidance and cooperates with authorities to stop chip smuggling while protecting lawful sales. The report contained no evidence that Kessler ordered investigators to stop their work or that Nvidia succeeded in shaping the outcome, and the criminal probe means the case remains open. The report also said Commerce has not added a company to its Entity List in more than a year, the longest such gap in 18 years. That list is a central tool Washington uses to limit foreign firms' access to American technology. Megaspeed, for its part, has rejected allegations of illicit chip transfers, saying inspections by the Commerce Department's Bureau of Industry and Security, Malaysia's Ministry of Investment, Trade and Industry and Nvidia itself turned up no violations. The company said it complies with export-control rules and is weighing legal action over what it called misleading reporting. China's Foreign Ministry dismissed the spy allegations, calling them unsubstantiated smears against China. President Donald Trump, asked about the matter, said he had not discussed the allegations with Jensen Huang and described him as a fine person, adding he did not believe Huang should have acted on the intelligence when briefed. Jensen Huang told employees he had been unfaithful to his wife and took full responsibility, saying his actions hurt his family and that he is committed to protecting Nvidia and supporting America's national security. Nvidia said its board has no reason to believe national security or company secrets were compromised and expressed confidence in the chief executive. The affair has coincided with a rough stretch for Nvidia's stock, which fell about 5% to 6% in premarket trading, extending a slide of roughly 22% from an October peak. Analysts see governance risk as the central question, with Dan Ives of Yorkville Ives & Co. noting the risk that Jensen Huang could be removed as CEO depending on the board investigation, which adds risk to the stock given how closely the leader is tied to Nvidia's strategy. Republican lawmakers on the House have asked Jensen Huang to brief Congress on the matter, citing significant national security concerns about China's access to sensitive U.S. technology. U.S. export controls in place since 2022 are meant to keep advanced Nvidia chips and the equipment to make them out of Chinese hands. For investors, the immediate overhang is uncertainty: an open criminal probe, a board review with outside counsel, and a CEO whose future is now a variable in the AI trade. The next scheduled marker is Nvidia's quarterly report on Nov. 17, though the board inquiry is unlikely to conclude by then.