Singapore-based data center operator Megaspeed International purchased more than $4 billion in advanced chips from Nvidia (NASDAQ: NVDA) following US export restrictions, exposing a loophole that potentially routes high-performance computing power to restricted Chinese buyers.
Headquartered in a curved glass skyscraper overlooking Singapore’s Marina Bay district, Megaspeed International transformed from an offshoot of a Chinese gaming company into a buyer of US semiconductors, CNN reported.
The rapid expansion placed the firm at the center of an investigation involving Nvidia and its chief executive, Jensen Huang, who resigned on Thursday after admitting to an affair with Alice Huang, whom US officials believe to be a Chinese intelligence asset.
Export Controls and The Singapore Data Center Loophole
In 2022, the US began restricting sales of advanced semiconductors to China to curb Beijing’s technological advancement. However, those controls created opportunities for intermediaries willing to help circumvent them.
Trade records show that Megaspeed has purchased more than $4 billion in chips and equipment from Nvidia. Incorporated in 2015 as 7Road International, the company changed its name to Megaspeed in March 2023 while Alice Huang served as a director through November of that year.
Alex Capri explained the structural vulnerability in how the enterprise operates. “If you put me on the restricted list to drive a Ferrari, and I say ‘Okay, well I can’t buy a Ferrari, I can’t import a Ferrari, but I can just go to a car dealership and rent a Ferrari,’ right? And do whatever I want with the Ferrari,” Capri told CNN.
“That’s an issue. It’s the car dealership that you have to control.”
By building data centers and renting out computing services, Megaspeed’s business model gives Chinese companies another point of access to advanced US chips.
On Thursday, Megaspeed CEO Tan Yong Pong said that the firm cooperated with inspections by the US Department of Commerce and retained a US law firm to verify compliance. “Megaspeed takes its compliance obligations under US export control laws extremely seriously. Compliance is a fundamental priority for the company, and Megaspeed is committed to working constructively and transparently with the US government,” Tan said in a statement.
Ghost Corporations and Covert Routes Move US Semiconductors to China
Independent research institutes estimate that between 290,000 and 1.6 million advanced US semiconductors reached China last year in violation of export rules, relying on ghost corporations and covert shipping routes.
Trade data investigator William George described the transit corridor to CNN: “This is a pipeline that has developed that benefits from the fact that there is minimal scrutiny on US air data, that you can bring things into Singapore, Malaysia, Central and Southeast Asia and then move those goods, sometimes through Thailand, into China.” George added that it is “incredibly hard to look at this and not see a Chinese state-sponsored network for bypassing US export control networks.”
Singapore’s Ministry of Home Affairs investigated Megaspeed and Alice Huang for potential false declarations regarding server purchases. Officials found insufficient evidence to charge her with related offenses, but barred her from re-entering the country after she provided inaccurate information to minimize her role.
Commerce Department Avoids Labeling Megaspeed a National Security Threat
Despite ongoing federal scrutiny, the Department of Commerce under Secretary Howard Lutnick has not labeled Megaspeed a national security threat or restricted its chip purchases. That administrative decision prompted a confrontation from Treasury Secretary Scott Bessent last week, according to sources familiar with the matter.
A May short-seller report from Culper Research estimated that Chinese end-users still account for roughly 20% of Nvidia chip sales via illegal diversion and Southeast Asian intermediaries. Jensen Huang previously lobbied the US administration to relax controls on older architectures such as the H200, an exemption the government ultimately approved while collecting a quarter of the revenue.
“There’s going to have to be new standards that are going to have to be enforced around traceability and transparency,” Capri said. “This is really going to be the beginning of a major crackdown, and actually moving on to the next phase of export control enforcement.”
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
