Nvidia Supplier Megaspeed Under Scrutiny for Potential China Export Violations

A Mystery C.E.O. and Billions in Sales: Is China Buying Banned Nvidia Chips?

Ana Swanson reported from Washington; Tripp Mickle from San Francisco and Fremont, Calif.; Paul Mozur from Taipei, Singapore and Johor, Malaysia; and Mara Hvistendahl from Amsterdam. On a humid June night last year, Jensen Huang, the chief executive of Nvidia, held court with several of his company's major Asian customers at a bar with sweeping views of Taipei. They stood and toasted the booming artificial intelligence industry. Next to the Nvidia chief was a woman named Huang Le, or Alice Huang, an executive of a Singapore-based data center company called Megaspeed, which was poised to buy $2 billion of Nvidia A.I. technology over the next year. Though Ms. Huang and Megaspeed are little-known players in the A.I. industry, their association with Nvidia and its chief executive has recently become a preoccupation in Washington. Commerce Department officials have been investigating whether Megaspeed, which has close ties to Chinese tech firms, is helping companies in China sidestep American export restrictions, according to more than a half dozen current and former officials and other people familiar with the companies, who spoke on condition of anonymity to discuss an examination that is not public. The inquiry, which is active, calls into question how closely Nvidia is tracking where its A.I. chips end up and highlights the possibility of American export laws easily being sidestepped. Megaspeed is also facing scrutiny from Singaporean police, who told The New York Times in a statement that they are investigating the company for breaching local laws, without elaborating further. As the dominant provider of artificial intelligence chips, Nvidia's annual revenue have soared nearly sevenfold in the past four years, making it the world's most valuable publicly traded company. But the Silicon Valley company's meteoric rise has coincided with U.S. government concerns that its chips could help adversaries like China develop new weapons, surveil dissidents and leap ahead of the United States in A.I. development. Those concerns led both the Biden and Trump administrations to crack down on A.I. chip sales to China. But some Chinese companies employ global networks of middlemen and shell companies to sidestep those limits. In a legal gray area, some have built vast data centers in Southeast Asia that have fueled China's gains in A.I. Other Chinese companies have set up illegal smuggling networks, moving perhaps hundreds of thousands of blocked chips into China, experts estimate. In April, the House Select Committee on China opened an investigation into Nvidia's sale of chips to China and Southeast Asia. Nvidia has expanded its operations in Taiwan in recent years, but it remains firmly anchored to Silicon Valley, where it was founded more than three decades ago. Megaspeed illustrates the challenges facing U.S. government officials trying to keep China from accessing powerful A.I. chips. After splitting off from a Chinese gaming company in 2023, Megaspeed set up a subsidiary in Malaysia that quickly snapped up nearly $2 billion worth of Nvidia's most advanced products. Most of those chips came from the U.S. branch of a Chinese company that has already been sanctioned for providing technology to the Chinese military, according to records obtained through ImportGenius, a trade data platform. Megaspeed has funneled those chips to data centers in Malaysia and Indonesia that appear to remotely serve customers in China. That is not necessarily illegal, but it can be found unlawful if it is done on behalf of a Chinese company. U.S. officials have also been scrutinizing whether Megaspeed diverted some of those chips on to China, in violation of U.S. law, two people familiar with the company said. The Times visited sites in four countries, reviewed shipment records, business registrations, videos and photographs, and interviewed more than 30 people to shed light on Megaspeed's opaque operation. Reporters tracked business listings that led to a Malaysian data center and shopping mall, a near-empty office in Singapore and a dilapidated storefront outside Kuala Lumpur. Nvidia said there was no evidence that its chips had been smuggled into China. John Rizzo, a spokesman for Nvidia, said in a statement that the chipmaker had "engaged with the U.S. government" regarding Megaspeed. Nvidia's compliance team also looked into Megaspeed and determined it was "wholly owned and operated by a company based and headquartered outside China, with no China shareholders," he said. Mr. Rizzo said Nvidia had visited Megaspeed's facilities multiple times. During a visit this week, he said Nvidia employees "found no evidence of diversion, and confirmed what we previously observed -- Megaspeed is running a small commercial cloud, like many other companies throughout the world, as allowed by U.S. export control rules." Megaspeed said in an emailed statement that it "is a Singapore-based company, operating fully in compliance with all applicable laws, including U.S. export control regulations." It declined to comment further. Ms. Huang did not respond to requests for comment. The Commerce Department, which oversees export controls, said it did not comment on active enforcement matters and could not confirm or deny the existence of any pending investigations. It added that the Trump administration would aggressively investigate allegations of wrongdoing and that exporters should perform due diligence and investigate any red flags. The White House did not provide a comment. Singapore's Ministry of Home Affairs declined to comment. The Ministry of Investment, Trade and Industry in Malaysia said that the country had recently strengthened its oversight of the export of A.I. chips and that it maintained an active dialogue with the United States about its controls. Aaron Bartnick, an assistant director for technology security and governance under the Biden administration, said Megaspeed raised "many red flags," including its ownership claims and possible ties to sanctioned entities, that should have made Nvidia's executives question whether they should have permitted the company to have access to its A.I. chips. "It's hard to see a justification for taking that risk," he said. From China to Singapore Megaspeed was created in 2023 when 7Road, a Chinese gaming and cloud computing company with ties to state-backed investors, split off its overseas operation in Singapore and renamed it Megaspeed. Megaspeed listed Ms. Huang as its managing director for its first eight months before removing her from that role in its corporate paperwork. (She has also described herself as the company's chief executive.) The company's current director is from Singapore but is based in Shanghai, according to business records and his social media account. Companies around the world were scrambling to buy the Nvidia chips used to build ChatGPT, which was released in November 2022. And the U.S. government was setting up a technological dragnet to stop advanced chip sales to China. It is not clear when Mr. Huang and Ms. Huang, who are not related, first met. She was mingling with a crowd of tech executives just after midnight at the Taipei bar in early June of last year when she offered to ask Mr. Huang of Nvidia to join them, recalled Parker Schmitt, an executive who was with the group. "She said, 'I bet you guys I can get Jensen here,' and then Jensen immediately showed up," Mr. Schmitt said, referring to Mr. Huang by his first name. Photos posted to LinkedIn by NetThunder, a data software provider where Mr. Schmitt is chief executive, show Mr. Huang at the bar with the group. Shortly after Ms. Huang reached out, Mr. Huang arrived in his trademark black leather jacket and drank a whiskey shot with the group. He was accompanied by two other Nvidia executives and had planned to attend the party, said a person close to the company. "Our field operations teams often host groups of customers and partners at conferences, and when Jensen is available, may ask him to visit to provide updates on the market," Mr. Rizzo of Nvidia said. Mr. Huang and Ms. Huang were photographed together again in May, exiting a restaurant in Taipei with an Nvidia aide after a business dinner with other A.I. suppliers. In a video from the SET News channel in Taiwan, she waited behind Mr. Huang as he passed out noodles from the restaurant to onlookers and spoke to the Taiwanese press. Ms. Huang has a scant online profile. She spent much of her career in mainland China, including working as a television reporter for Chinese state media and as a private banker, according to a biography found on the social media of a former employer. The Times could not confirm either of those experiences. Ms. Huang left Megaspeed in recent months. The exact date is unclear. It is also unclear why she left and what she is doing now. Both she and 7Road, the Chinese company that Megaspeed split off from, have close ties to a web of wealthy investors and tech companies with data center projects in China, according to a review of corporate and trade records compiled by the platforms WireSreen and Sayari, and analysis by the Center for Advanced Defense Studies, a Washington nonprofit. The owners of 7Road include the Chinese central government and several local governments. Before joining Megaspeed, Ms. Huang was executive director for a Shanghai-based fund that had invested in 7Road and had ties to state-backed firms. Valuable Shipments It is not clear where Megaspeed's billions of dollars came from to buy chips. But a few weeks after the gathering in Taipei last year, Megaspeed began receiving a steady supply of multimillion dollar shipments of some of Nvidia's most advanced chips, according to Malaysian trade records. Those purchases would have been illegal under U.S. law if Megaspeed were still a Chinese subsidiary. But Nvidia had determined that Megaspeed was a Singaporean company, said a person close to the company's compliance division, and believed it was a newcomer to the cloud-computing industry that would compete for business against U.S. companies. Megaspeed, Nvidia officials said, did not raise any red flags. Over the next three months, Megaspeed bought a billion dollars of Nvidia technology. Within the next nine months, it secured roughly a billion dollars more. Worldwide, Nvidia recorded roughly $115 billion in data center sales last year. Malaysian import records show that the bulk of those advanced Nvidia chips were purchased from what WireScreen says is the U.S. subsidiary of Inspur, a major Chinese tech firm that the United States has sanctioned for trying to acquire American technology to build supercomputers for the Chinese military. Inspur and Aivres, the subsidiary, didn't respond to requests for comment. In 2023, Inspur was added to the U.S. entity list for supporting the Chinese military. The listing means that U.S. companies like Nvidia are barred from selling their technology to Inspur without a special license. But because Inspur's subsidiary, Aivres, is based in California and records sales as a U.S. company, it can buy Nvidia chips freely, legal experts said. The shipments went to Speedmatrix, a subsidiary that Megaspeed had set up in Malaysia in early 2024, according to shipment records obtained by ImportGenius, the trade data platform. The registered address for Speedmatrix on the shipping records led to a dilapidated storefront outside Kuala Lumpur, where the sign out front advertised a construction company. Calls by Times reporters to the construction company went unanswered, and no one was inside when a reporter visited the address in late September. Employees at the law firm next door said they rarely saw people in the office. In September 2024, an official with the U.S. Bureau of Industry and Security, the division of the Commerce Department that overseas export controls, visited Megaspeed's data center in Malaysia to investigate suspicions about how much it was buying. Officials were concerned that Nvidia technology on site was still in boxes, three people familiar with the inspection said. Such behavior arouses suspicions because some companies bypass checks by showing they have the technology before later shipping it elsewhere. U.S. officials suspect that some of the chips may have been sent on to China, the people said, but they do not have conclusive evidence. After the visit, U.S. officials communicated their concerns about Megaspeed to Singaporean and Malaysian authorities, as well as Nvidia, the three people said. The United States has been pressuring those governments to better police data center projects and chip smuggling networks. In February, Singaporean police arrested nine people, including several Chinese-born executives of other technology companies, for making "misleading claims" about the end destination of computer servers that use the A.I. chips. Malaysia said in July that it would require permits for all export and transfers of Nvidia chips. The crackdown has coincided with a stall in Megaspeed's chip purchases. By late July, trade records indicate that the company had stopped receiving shipments of advanced Nvidia chips, despite expectations that it would buy billions more. Nvidia confirmed Megaspeed had not submitted new orders for months, but did not offer an explanation why. The company was projected to buy as much as $3.2 billion of Nvidia's highest-performing computers over the next year, according to Morgan Stanley. Those computers are packed with the company's A.I. chips. A Boom Fueled by China In Singapore and Malaysia, traces of Megaspeed linger in half-empty offices, on corporate documents and behind the fences of advanced A.I. data centers. In a premier office building in Singapore's sleek central business district, just two employees were present on a recent weekday in Megaspeed's offices. A door behind a small, staged waiting area gave way to a minimalist white office, with several clusters of empty desks. A human resources manager said she had met few of the firm's directors, most of whom were based in China and seldom visited Singapore. Most of its clients, she added, are Chinese. She said Ms. Huang had stepped down months earlier because of personal commitments to other businesses. James Tan, who is listed in corporate records as the company's Singaporean director, is never present, she said. According to corporate ownership documents, Megaspeed is owned by a shell company that Mr. Tan owns. The shell company's address led to an accounting firm in Singapore, where employees told a Times reporter that they did not know how to reach Mr. Tan. Two hours north, hulking data centers rose over palm oil fields that dotted the Malaysian countryside. Sedenak Tech Park, a complex of data centers with its own ties to China, bristled with cameras and high-tension wires. It was there that U.S. officials found Megaspeed's inventory still in boxes. In Johor, the Malaysian state across the border from Singapore, Megaspeed's Malaysian subsidiary, Speedmatrix, has an office on the upper floors of a shopping mall near snack stores and beauty parlors. The office's windows were obscured by reflective glass and its doors were fitted with fingerprint scanners. When a Times reporter visited, three employees inside did not answer despite repeated knocks. A woman eventually emerged for lunch and identified herself as an administrator. She said she had no contact with her bosses. When asked what the company did, she said, "It's not clear." Reporting was contributed by Pei-Lin Wu from Taipei; Berry Wang from Hong Kong; Zunaira Saieed from Kuala Lumpur and Johor; Nicholas Yong from Singapore; and Julian Barnes from Washington. Kirsten Noyes, Malachy Browne and Joy Dong contributed research.

Nvidia supplier Megaspeed under U.S. scrutiny for China ties - NYT By Investing.com

Investing.com -- A Singaporean firm with connections to Nvidia CEO Jensen Huang is facing investigation by U.S. Commerce Department officials over potential violations of American export restrictions to China. Megaspeed, which maintains close relationships with Chinese technology companies, is being examined for possibly helping Chinese firms bypass U.S. export controls, according a report from the New York Times, citing to more than six current and former officials and other individuals familiar with the companies. These sources spoke anonymously as the investigation is not public. The ongoing inquiry raises questions about Nvidia's tracking systems for its artificial intelligence chips and highlights potential vulnerabilities in American export regulations. Beyond U.S. scrutiny, Megaspeed is also under investigation by Singaporean police for alleged violations of local laws, though authorities did not provide specific details about the nature of these breaches. The case underscores growing concerns about the enforcement of technology export controls as competition in the global AI chip market intensifies. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.