Treasury Secretary Scott Bessent confronted Commerce Secretary Howard Lutnick last week over his handling of a Singaporean company at the heart of revelations about Chinese spying on Nvidia, demanding to know why the United States had not already banned sales of advanced A.I. chips to the firm.
The exchange, which took place at the White House on Thursday and was described by people briefed on it, highlighted growing tensions inside the Trump administration over A.I. policy in general and the Commerce Department’s posture toward Nvidia in particular.
The internal debate has only intensified after Jensen Huang, Nvidia’s chief executive, acknowledged he had an affair with a woman who had helped lead the Singaporean data center company, Megaspeed. The woman, Alice Huang, a Chinese citizen, has been identified by U.S. intelligence as a spy for China’s Ministry of State Security, The New York Times has reported.
Mr. Lutnick responded to Mr. Bessent that the Commerce Department could now move quickly to put restrictions on Megaspeed in place, said the people briefed on the exchange, who spoke on condition of anonymity because the discussions were private.
A spokeswoman for the Commerce Department denied that the conversation between Mr. Bessent and Mr. Lutnick had taken place. She said that the decision about whether to add companies to the entity list was an administration-wide one.
The Treasury Department did not provide a comment.
The United States has imposed restrictions since late 2022 on selling advanced chips directly to China. But Megaspeed and other companies have sidestepped those rules by setting up data centers in Southeast Asia to cater to Chinese clients. U.S. officials have also been investigating Megaspeed for potentially diverting those chips illegally into China, a charge that Megaspeed has denied.
The move to blacklist Megaspeed had earlier been discussed at a meeting of the deputies of cabinet officials, where Jeffrey Kessler, an under secretary in the Commerce Department, deferred on taking action, saying that the decision was up to Mr. Lutnick.
The confrontation between Mr. Bessent and Mr. Lutnick was reported earlier by Axios.
In recent months, the fight over how to regulate U.S. technology has increasingly left other departments at odds with officials from the Commerce Department, which oversees technology export rules. Megaspeed’s purchases of more than $4 billion of advanced Nvidia technology have helped to reignite a debate in the administration and Washington more broadly about how rigorous U.S. controls over technology exports should be.
One of the Commerce Department’s most powerful rules is the entity list, a trade blacklist. U.S. companies are prohibited from shipping products to any firm on the entity list without first obtaining a license from the U.S. government.
During the first Trump administration and throughout the Biden administration, the government started to use the entity list more aggressively toward China’s technology sector. In March of last year, the Trump administration also issued a large update to the list, adding more than 80 companies and organizations.
But the administration has backed off use of the list more recently, as it tries to maintain a trade truce with China. More than a year has passed without any firm being added to the entity list, the longest stretch in 18 years. The Trump administration has considered entity listings of Chinese A.I. firms like Deepseek and Alibaba, but has not yet decided to move forward with them.
Still, many Trump officials have argued that Megaspeed should be added. A few months ago, officials at several agencies who oversee technology licensing agreed that Megaspeed should be put on the list, including the State Department. But the Commerce Department, which has final responsibility for issuing rules, did not take action.
The Commerce Department’s inaction led to frustrations across the administration and to Mr. Bessent’s confrontation with Mr. Lutnick.
U.S. officials in the Commerce Department began looking into Megaspeed in 2024, after the company started importing billions of dollars’ worth of advanced Nvidia A.I. equipment into Malaysia. Megaspeed had been planning and constructing data centers in Southeast Asia to serve Chinese clients, including Alibaba. That behavior is legal, but U.S. officials were concerned that some of the Nvidia chips the company had bought were illegally routed to China.
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