An American investigation into suspected smuggling of Nvidia AI chips into China came to an abrupt halt after a senior Nvidia lawyer contacted Commerce Department investigators directly, according to NZ Herald reporting published on 9 November 2026. The case, centred on the Singapore-based firm Megaspeed, was hastily transferred to the Justice Department after the intervention raised alarm inside the department.
The episode, first reported by The New York Times and detailed by the paper on Sunday, has intensified scrutiny of Nvidia's outsized influence over US export policy and of the Trump administration's deference to the company powering America's AI boom.
What happened in August 2025
In August 2025, agents at the Commerce Department's Bureau of Industry and Security were months into an investigation of Megaspeed when they received an email from Teter, Nvidia's general counsel. Teter told the agents that Kessler, the undersecretary who oversees the bureau and was nominated by President Donald Trump, had given him permission to reach out about the case.
The agents were alarmed that Nvidia had invoked Kessler's name. Some viewed the interaction as violating government procedure and potentially tainting the case, according to current and former officials familiar with the incident. When the employees declined a requested meeting, Teter replied that he was unsure what the issue was because Kessler had said Nvidia could communicate with bureau staff.
The employees forwarded the email chain to Kessler. Hours later, he responded, telling them to continue handling the case strictly by the book. A Commerce Department official said Kessler did not order anyone to divulge information to Nvidia, and did not weigh in on what meetings to take or what to share.
An unusual handoff to the Justice Department
Officials described the way the case was handed off as unusual and concerning. Several, speaking anonymously because of the sensitivity of the matter, questioned why the Commerce Department was discussing the case with Nvidia at all, given that Nvidia had not been ruled out as a subject of the investigation.
After Teter's email, Commerce officials convened meetings, rapidly disclosed the incident to partner law enforcement agencies, and then paused their work at the Justice Department's request. The Justice Department is now conducting a criminal inquiry into Megaspeed, according to people familiar with the matter.
The suspension frustrated agents who had spent months building the case. It may also have delayed action that could have stopped technology shipments to Megaspeed sooner.
The Megaspeed case and the Alice Huang revelations
The United States began investigating Megaspeed and its executive Alice Huang in 2024, after the company began importing billions of dollars' worth of advanced Nvidia AI equipment into Malaysia and building data centres across Southeast Asia to serve Chinese clients, including Alibaba. That activity is legal. US officials were concerned, however, that some Nvidia chips the company bought had been illegally routed into China in breach of export controls.
The New York Times reported last month that the US government had concluded that Huang, also known as Huang Le, was a spy working on behalf of the Chinese government. Over the weekend, Nvidia said it was opening an investigation into its chief executive, Jensen Huang, after he acknowledged to the board that he had been intimate with Alice Huang. The two, who are not related, had been photographed together on several occasions in Taiwan alongside other tech executives.
Trump was briefed in October 2025 that Alice Huang had a relationship with Jensen Huang and was presumed to be a spy, the Philadelphia Inquirer reported, but the President chose not to act on that intelligence.
Nvidia's sway over export policy
Government officials inside and outside the Commerce Department already had concerns about the Trump administration's deference to Nvidia, a driving force behind America's AI growth and its stock market. Jensen Huang has been an influential voice on export control policy with both Trump and Commerce Secretary Howard Lutnick, whose department controls American technology exports.
Since Trump's return to office, Kessler and other department leaders have required that investigations into Nvidia, and any outreach to the company, first receive their approval. Kessler has also kept tight control over licences granted by the department, many of which involve Nvidia technology.
While other agencies have proposed placing Megaspeed on the entity list, the trade blacklist overseen by the Commerce Department, the department has not acted. It has not added a company to the entity list in more than a year, the longest such stretch in 18 years.
What the companies and agencies say
A Justice Department spokesperson said the agency does not comment on continuing investigations. A Commerce Department spokesperson said the department had been aggressively enforcing its rules and had conducted this and other actions strictly by the book.
Nvidia spokesperson John Rizzo said the company consults with officials to answer their questions, provide information gathered from the field, and ask for guidance and follow-ups. He said Nvidia works to help government and partners halt would-be smugglers while serving lawful customers that help America win worldwide.
A representative for Megaspeed said the company was conducting an internal investigation into allegations of chip diversion and had repeatedly offered to cooperate with the US government, but those offers had gone unanswered.
Why it matters beyond Washington
The affair touches on questions that matter far beyond the Beltway. Export controls are one of the few levers governments hold over a technology industry whose products shape everything from energy grids to surveillance. If a single company can lean on the officials enforcing those rules, the safeguards weaken for everyone, including allies like New Zealand that depend on trustworthy technology trade rules.
Kessler's interactions with Nvidia could also become subject to legal discovery or a subpoena if the department pursued future legal action against Megaspeed. As undersecretary, he would normally be walled off from the finer details of such an investigation, since he might be called on to serve as a neutral arbiter. Perhaps inadvertently, officials said, he had opened himself to accusations of undue influence.
It remains unclear whether other factors contributed to suspending the department's work. The decision coincided with the collection of US intelligence concluding that Alice Huang had spied for China. What happens next rests with the Justice Department's criminal inquiry, whose outcome will test whether US export enforcement can withstand the political weight of the industry it regulates.
FAQ
Why was the Megaspeed investigation halted?
Commerce Department officials paused their work after Nvidia's general counsel contacted investigators directly, citing permission from undersecretary Kessler. The case was transferred to the Justice Department to avoid any potential compromise of the investigation.
Who is Alice Huang?
Alice Huang, also known as Huang Le, is a top Megaspeed executive. The US government concluded she was a spy working for China, and Nvidia is investigating its CEO Jensen Huang after he acknowledged an intimate relationship with her.
What is Megaspeed accused of?
The company is suspected of illegally routing advanced Nvidia AI chips, imported into Malaysia, into China in violation of US export controls. Megaspeed denies wrongdoing and says its offers to cooperate have gone unanswered.