Commerce Dept. Chip Inquiry Was Halted After Nvidia Intervention

Commerce Department investigators spent months building a case against Megaspeed International, a Singapore-based data center operator suspected of diverting Nvidia's most advanced AI chips to China in violation of export controls. The inquiry gained traction after unpacked Nvidia equipment surfaced at a Malaysian data center linked to the company. Then, late last year, the investigation stopped. Nvidia's general counsel, Tim Teter, emailed Commerce agents saying that Jeff Kessler — a top department official nominated by President Trump — had given the company permission to reach out about the case. Agents found the invocation of their superior's name highly unusual and potentially compromising, according to current and former officials familiar with the matter.

The case was quickly transferred to the Justice Department, which handles criminal prosecutions, in what officials described as an effort to avoid any appearance of compromise. That transfer now sits at the center of a deeper controversy. The New York Times reported last month that U.S. intelligence concluded Alice Huang, a top Megaspeed executive, was a Chinese intelligence asset. On Sunday, Nvidia confirmed that CEO Jensen Huang acknowledged to the board an intimate relationship with Alice Huang — they are not related — after photographs of them together in Taiwan circulated. Nvidia's board has since launched an independent investigation into whether its chief executive was targeted by foreign intelligence.

Nvidia disputes any wrongdoing. The company says earlier internal reviews found no evidence of chip diversion, that it has accounted for every deployed GPU, and that Megaspeed has no Chinese shareholders. A company spokesman said Nvidia consults with officials "to answer their questions, provide information we have gathered from the field, request their guidance and instructions and ask whether they have any follow-ups." Singapore authorities are also investigating Megaspeed, though no illegal diversion of U.S.-origin chips has been publicly established. The Justice Department declined to comment on its ongoing inquiry, while a Commerce Department spokesman said the agency had been "aggressively enforcing its rules" and acted "strictly by the book."

The episode raises pointed questions about enforcement of the export controls Washington relies on to keep advanced semiconductors out of China. Southeast Asian hubs like Singapore and Malaysia have become critical choke points where chips can be legally sold to third-country intermediaries and quietly forwarded onward — a practice known as transshipment. Whether Nvidia's contact with Kessler influenced the handoff or merely coincided with a planned transfer remains unresolved. But the sequence — investigators deep in a case, a vendor invoking a political appointee, the case moving to a slower criminal track — is exactly the thread critics will pull hardest. Nvidia shares fell in after-hours trading Sunday following the board's announcement.