Commerce Secretary Howard Lutnick repeatedly stalled efforts to tighten export controls meant to stop Nvidia’s advanced AI chips from reaching China, according to a report from Axios based on six sources, some of whom were present for the discussions in question.
The sources say President Trump approved taking action on at least three separate occasions — in May, August, and November 5 — but Lutnick delayed implementation each time. As of this week, Commerce has not added a single company to its Entity List, the primary tool used to restrict trade with firms suspected of violating export rules, in more than a year.
The dispute centers partly on Megaspeed, a company suspected of diverting Nvidia chips to China, and on Alice Huang, described in a highly classified memo as having a relationship with Nvidia CEO Jensen Huang and as a suspected Chinese intelligence asset. That memo, reportedly drafted by Secretary of State Marco Rubio, was circulated to administration officials in May, though it remains unconfirmed whether its contents were communicated directly to President Trump.
Shortly after the memo circulated, Treasury Secretary Scott Bessent, Director of National Intelligence Jay Clayton, Secretary of War Pete Hegseth, and White House officials pressed Lutnick and Commerce Undersecretary Jeff Kessler, who oversees the Bureau of Industry and Security, to act. According to a source, “they were refusing.”
A Situation Room Confrontation
Matters came to a head last Thursday in the White House Situation Room, where Bessent — with Hegseth and Rubio present — directly confronted Lutnick, asking, “How come Megaspeed isn’t on the entities list?” Lutnick reportedly stammered before answering, “I don’t know. I’ll look into it.”
One source with extensive knowledge of the chip controversy called that response “bullshit,” noting Lutnick had resisted action since personally receiving the Rubio memo. Lutnick then told the group he would need to check with the president.
The discussion moved to the Oval Office, where Trump called Elon Musk, who sided with Bessent, Rubio, and Hegseth. Lutnick argued that tightening controls would “start a trade war with China.” According to a source, other officials pushed back, arguing “China is already doing to us what Lutnick warned would happen.”
“Let’s get it done,” Trump said, siding against Lutnick, the lone holdout in the room.
But sources say Lutnick tried again to delay once the group left the Oval Office, saying, “I’ll develop some options and come back.” One source described the reaction: “Everyone was like: ‘No, no, the decision’s been made. Go fucking execute.’ Well, it still hasn’t happened.”
A Commerce Department spokesperson has denied that the confrontation took place.
Parallel Investigations, Including in Manhattan
The dispute over export enforcement is unfolding alongside separate criminal investigations. The New York Times has reported that Kessler halted a Commerce investigation into Megaspeed after Nvidia intervened, and the Department of Justice has since taken over that probe.
Bloomberg reported Thursday afternoon that the U.S. Attorney’s Office in Manhattan is leading an investigation into whether companies tied to Alice Huang helped smuggle Nvidia-powered servers made by Super Micro into China. It is unclear whether that inquiry is connected to existing chip-smuggling cases. Manhattan prosecutors already charged Super Micro co-founder Yih-Shyan “Wally” Liaw and two others in March, alleging a conspiracy to ship Nvidia-powered servers to a Southeast Asian company for diversion to Chinese customers. Liaw has pleaded not guilty and has left the company. Super Micro itself is not a defendant and says it is cooperating with authorities.
The Justice Department is separately investigating Megaspeed International, Alice Huang’s former company, over suspected chip smuggling; the company denies wrongdoing. Semafor has also reported an antitrust investigation into Nvidia and a separate probe into Megaspeed.
Attorney General Todd Blanche, who was not in his current role when these investigations began, downplayed the matter at an unrelated press conference Thursday, saying, “I don’t have concerns with the Commerce Department.”
Add comment