A US investigation into a Singapore-based data centre company suspected of diverting advanced Nvidia artificial intelligence chips to China was abruptly transferred from the Commerce Department to the Justice Department last year after Nvidia's general counsel contacted officials handling the case, according to a report by The New York Times.

The investigation focused on Megaspeed, a company that had imported billions of dollars' worth of advanced Nvidia equipment into Malaysia since 2024 while developing data centres across Southeast Asia for Chinese clients, including technology giant Alibaba. US officials suspected that some of the chips could have been illegally routed to China, in violation of American export controls.

The company was also led by Alice Huang, a senior executive whom US officials reportedly concluded was working as a spy for the Chinese government. The NYT reported last month that the US government had reached this assessment. Huang, who is not related to Nvidia CEO Jensen Huang, had an intimate relationship with the chipmaker's chief executive, a development that has brought additional scrutiny to Nvidia's interactions with the US government.

According to the NYT, the investigation took an unexpected turn in August 2025, when Nvidia general counsel Tim Teter emailed officials at the Commerce Department's Bureau of Industry and Security (BIS), which was pursuing the case. Teter said that Jeff Kessler, a senior Commerce Department official reporting to Secretary Howard Lutnick, had given Nvidia permission to contact investigators about the matter.

Commerce Department investigators were reportedly concerned that the company had invoked Kessler's name while attempting to arrange a meeting. When the officials declined the request, Teter responded that he did not understand the reason because Kessler had authorised Nvidia to communicate with the bureau's employees.

The investigators forwarded the email exchange to Kessler. Hours later, he instructed them to continue handling the case strictly by the book, according to a Commerce Department official cited by the NYT. The official said Kessler did not direct investigators to share information with Nvidia or influence their decisions about meetings.

Investigation moved to Justice Department

The episode prompted meetings within the Commerce Department and disclosures to partner law enforcement agencies. The Justice Department subsequently requested that Commerce pause its investigation, and the case was transferred to federal prosecutors, people familiar with the matter told the NYT. The Justice Department is now conducting a criminal inquiry into Megaspeed.

The handover frustrated investigators who had spent months building the case and may have delayed action to prevent further shipments of restricted technology to the company, the report said.

The Commerce Department said it had been aggressively enforcing export controls and conducting its actions by the book. Nvidia spokesman John Rizzo said the company consults government officials “to answer their questions, provide information we have gathered from the field, request their guidance and instructions and ask whether they have any follow-ups.”

He added that Nvidia works “to help government and our partners halt any would-be smugglers while serving the critical market of lawful customers that help America win worldwide”.

Megaspeed said it was conducting an internal investigation into the allegations and had repeatedly offered to cooperate with US authorities, but that its offers had gone unanswered.

The episode has also raised questions about the Trump administration's approach to Nvidia and export controls. The NYT reported that Kessler and other Commerce Department leaders had required senior-level approval for investigations involving Nvidia and other outreach to the company.

Meanwhile, the Commerce Department has not acted on proposals from other agencies to place Megaspeed on the entity list, a US trade blacklist restricting access to American technology. The department has not added a company to the list in more than a year, the longest such gap in 18 years, according to the report.

The developments come as the US government examines Nvidia's influence over policy on chip exports to China. CEO Jensen Huang has advocated allowing American companies to sell their products more freely, while the Trump administration has sought to avoid enforcement and regulatory decisions that could constrain US companies' position in the artificial intelligence industry.

Nvidia’s China chip diversion probe was halted after company approached US Commerce Dept: Report- Moneycontrol.com

A US investigation into Megaspeed over suspected diversion of Nvidia AI chips to China was transferred to the Justice Department after Nvidia's general counsel contacted Commerce Department officials, according to New York Times report.

Moneycontrol (www.moneycontrol.com)