Commerce Secretary Howard Lutnick is coming under public pressure from fellow members of the Cabinet over his decision not to blacklist Megaspeed, the cloud computing company at the center of former Nvidia CEO Jensen Huang's affair with a suspected Chinese spy.

The Treasury Department was among the federal agencies that favored placing trade restrictions on Megaspeed, but the decision ultimately rested with Lutnick, Treasury Secretary Scott Bessent told CNBC on Friday.

"There was coordination. Treasury, War, USTR, and State were in favor of putting Megaspeed on the entity list for months," he said. "But Commerce has the pen….You will have to ask them about their internal processes." His remarks were also highlighted in a post on X by Edward Lawrence.

The entity list is administered by Commerce's Bureau of Industry and Security, and inclusion imposes licensing requirements—generally denied—for U.S.-made technology bound for a listed company, effectively cutting it off from American chips. That structure explains the standoff Bessent described: multiple agencies can back restrictions for months, but only Commerce can put a company on the list.

Megaspeed is under investigation by the Justice Department over the suspected violation of U.S. export controls, which bar certain U.S.-made chips from being sold and shipped to China. Led by Alice Huang, the alleged spy, Megaspeed and its Malaysian subsidiary Speedmatric shipped at least $7.5 billion in Nvidia chips to China over two years, The Information reported.

Lutnick under pressure

The commerce secretary is facing intensifying scrutiny over reports that he moved to shield Nvidia from the Trump administration's export controls on U.S. AI hardware destined for China. According to Axios, Lutnick spent months "undoing" efforts to hold Megaspeed accountable for potential export control violations, and Bessent confronted him in the Situation Room after the midterm elections over Megaspeed's absence from the entity list.

Asked about that encounter, Bessent told CNBC, "We don't repeat conversations in the Situation Room."

In a separate account, the New York Times reported that when Trump officials approached Oracle about cancelling a $7 billion deal to lease chips to Chinese tech conglomerate Tencent, Lutnick's top deputy, Jeff Kessler, spoke up to say Lutnick had issues with a cancellation because it would halt the shipment of 100,000 advanced Nvidia AI chips. Lutnick reportedly said he did not understand the rush to scrap the deal.

The Commerce Department and Nvidia did not immediately respond to Fortune's request for comment.

Lawmakers from both parties want to hold Lutnick accountable for keeping Megaspeed off the blacklist. "The obvious question is why did he choose to sell advanced chips?" Republican Louisiana Sen. John Kennedy told Politico. "Secretary Lutnick needs to answer that in front of God and country."

Lutnick has agreed to testify alongside Huang before the Senate Banking Committee on Dec. 10 to address national security concerns.

Meanwhile, senior White House officials are weighing whether to remove the commerce secretary from his position, Reuters reported. Even before news of Huang's affair broke, Lutnick drew criticism for deciding not to add 100 companies, including China's DeepSeek, to the entity list, as Reuters reported in June.

The dispute now has two near-term focal points: Lutnick's Dec. 10 testimony before the Senate Banking Committee, which holds jurisdiction over U.S. export-control law, and the reported internal deliberations over whether he keeps the post—both carrying direct implications for future entity-list decisions.

Lutnick's potential conflicts of interest

According to the Times, Lutnick argued with senior White House officials that export regulations targeting China would stoke the trade war between the two countries, and he insisted on speaking with Trump directly about China's restricted access to U.S. chips.

The commerce secretary also maintained a friendly relationship and financial ties with Nvidia, feeding concerns about favoritism toward the tech company.

"Howard is the person I talk to most in the administration—he's on top of the technology and learning the industry quickly," Huang said in September 2025.

Before becoming commerce secretary, Lutnick served as CEO and chairman of investment bank Cantor Fitzgerald, which held about $1.2 billion in Nvidia stock prior to President Donald Trump's second term (see Nvidia's SEC filings). Those ties carry added weight in this dispute because Commerce holds final authority over the entity list—the same "pen" Bessent referenced—placing Lutnick personally at the intersection of the policy call and the financial ties now drawing scrutiny.

This story was originally featured on Fortune.com.