US targets the Megaspeed playbook as Nvidia CEO investigation heads up

The US has moved to close the backdoor route that allows Chinese firms to access high-end Nvidia chips, with Commerce Department rules being finalized that will require companies buying these chips from seven countries, including Singapore and Malaysia, to first seek approval, per The Information. 

The rules could be announced before the start of December.

The urgency behind the push to close the third-country compute rental route was escalated by the recent drama around Nvidia’s CEO Jensen Huang and his romantic relationship with an executive at the Singapore-registered Megaspeed, the company accused of running a scheme that connects Chinese customers to advanced Nvidia chips through its Malaysian data center. 

Which countries are on the Commerce Department list for chip import permissions? 

According to a report by The Information, the Commerce Department’s Bureau of Industry and Security has seven countries on the list that will require a license to import Nvidia’s Blackwell-class AI processors. The names on the list were reported as Brazil, Indonesia, Malaysia, Norway, Singapore, South Africa and Thailand. 

Companies importing high-end chips into Saudi Arabia and Vietnam already go through a similar approval process.

The rules, which could be finalized by the end of November, will require importers from these countries to clarify where the chips are going and how they plan to use them. They will also need to commit to long-term oversight. 

US companies operating data centers in the named countries could get an exemption from the licensing process, per reports. However, they still need to report which countries the customers they serve are in and how much compute capacity each one receives. 

Most importantly, none of that remote access compute can go to customers in China or Russia. 

Megaspeed is a classic example of Nvidia chip backdoor access

This is not the first attempt by the United States to plug the loophole that allows Chinese companies to access top-of-the-line Nvidia chips by renting AI compute capacity from Southeast Asian facilities. Earlier this year, BIS clarified in a May guidance that any entity, regardless of where it is incorporated, needs a license for advanced chips if its parent is based in China or Macau. 

However, remote access is not the only way banned Nvidia chips reach Chinese firms. Megaspeed, the Singapore-registered firm whose executive Nvidia’s embattled CEO, Jensen Huang, had an affair with, faces a joint US-Singapore investigation over allegations that it illegally shipped up to $2 billion worth of Nvidia processors to customers in China. 

Jensen’s love interest, identified as Alice Huang, also faces accusations of passing information to the Chinese state. 

Megaspeed denied the allegations.

Nvidia and Congress dig into Huang’s ties

Nvidia said on November 8 that independent directors, working with outside counsel, had opened an inquiry into whether Jensen Huang was targeted by a foreign intelligence operation. The board said it had no reason to believe US national security or Nvidia’s proprietary data had been compromised, and that Huang backed the investigation.

Huang separately told employees he had been unfaithful to his wife and apologized. Cryptopolitan, citing a Wall Street Journal report, noted that directors were weighing whether to remove him after 33 years, though no vote or firing had been confirmed. 

Nvidia shares have dropped about 7% over the week, their sixth straight weekly decline.

The scandal has escalated to Congress level. Commerce drew criticism after reports that it paused its Megaspeed probe once Nvidia’s involvement surfaced, and lawmakers are working to attach three chip-export bills to the National Defense Authorization Act. 

The Information argued that rules Nvidia had lobbied against are now advancing, a sign the company’s sway in Washington may have thinned since the Huang affair came to light.