Treasury Secretary Scott Bessent reportedly challenged Commerce Secretary Howard Lutnick over why Nvidia Corp. (NASDAQ:NVDA) customer Megaspeed remains absent from a national security export-control list amid allegations that the company diverted U.S. chips to China.

Bessent raised the issue with Lutnick during a White House Situation Room meeting held after the midterm elections, according to Axios. He asked why Megaspeed had not been placed on the Commerce Department's entity list, which restricts organizations considered national security risks. Lutnick responded that he would "look into it."

Sources told Axios that Commerce Undersecretary Jeff Kessler had received repeated warnings about Megaspeed but deferred the matter to Lutnick, saying, "That's a decision for the secretary."

Another Axios report stated that President Donald Trump, after consultation with Tesla Inc. (NASDAQ:TSLA) CEO Elon Musk, authorized a fresh crackdown on companies suspected of diverting Nvidia's advanced AI chips to China. Bessent, Defense Secretary Pete Hegseth, Secretary of State Marco Rubio and U.S. Trade Representative (USTR) Jamieson Greer supported the restrictions, arguing that China was already engaging in similar actions against the U.S. Trump ultimately approved the crackdown, saying, "Let's get it done."

However, Lutnick reportedly sought another delay after the meeting, saying he would develop additional options and return with them, highlighting divisions within the administration over restricting China's access to advanced U.S. technology.

The White House, the Commerce Department, the Treasury Department and Nvidia did not immediately respond to MarketDash's request for comments.

Gordon G. Chang, an American lawyer, author and China hawk, reacted to the Axios report and said, "Lutnick must resign."

Nvidia Probe Faces National Security Scrutiny

The controversy involves Nvidia CEO Jensen Huang, following allegations that Huang had an affair with Megaspeed employee Alice Huang, who is suspected of working as a Chinese spy. On Tuesday, Senate Minority Leader Chuck Schumer accused President Donald Trump of overlooking a potential national security threat involving Huang's alleged relationship with a Chinese intelligence operative. Schumer said that Trump had been briefed more than a year earlier about the alleged relationship.

The Commerce Department is facing increased scrutiny over the Trump administration's handling of an intelligence memo overseen by Secretary of State Marco Rubio, The New York Times reported. Lutnick received the report in May ahead of a China trip. Separately, The New York Times reported that Kessler abruptly halted an investigation into Megaspeed following intervention by Nvidia.

Nvidia shares fell in extended trading Wednesday following a report alleging Huang also had an affair with Kimberly Powell, the company's Vice President of health care, who reports directly to him. A separate report said Nvidia's board was preparing to consider removing Huang after learning of the two alleged extramarital affairs.