Nvidia stock rebounds as CEO faces spy affair scrutiny

Nvidia ↘ 5.47% shares rose in premarket trading on Wednesday, November 11, after two days of losses. CEO Jensen Huang is under scrutiny from the FBI, his company's board and a shareholder lawsuit over his affair with a woman U.S. officials reportedly suspect of spying for China. The stock closed 5.47% lower on Tuesday after a 4.3% drop on Monday, CNBC reported. Monday's decline erased about $190 billion in market value, according to the Associated Press.pbs.org+1

President Donald Trump said at a White House briefing on Monday that the FBI is looking into the affair. He added that he did not think Huang needed to worry. "I know the FBI is looking into it in terms of something else, and I think that he'll be in good shape," Trump said, per ABC News. Trump also said Huang told him in a phone call that he "had absolutely no idea" the woman might be a spy, Newsweek reported.newsweek.com+1

Shareholder lawsuit

Retail investor Mark Kistenmacher filed a proposed class action on Monday in federal court in San Jose. It accuses Nvidia and Huang of misleading investors about his relationship with Alice Huang, a former executive at Singapore-based Megaspeed, and about what it meant for national security. The suit covers investors who bought shares between October 9, when The New York Times first reported on the pair, and November 8, AP reported. The complaint says Nvidia's earlier statements that Megaspeed had done nothing illegal were "materially false and misleading," because Alice Huang is "suspected of seeking to help smuggle Nvidia products into China," Courthouse News reported. Rosen Law Firm brought the case, according to AFP.courthousenews.com+2

Board probe and political fallout

On Sunday, November 8, Nvidia's board opened an independent investigation into reports that Huang had been the "target of a foreign intelligence effort," The Hill reported. On Tuesday the company hired the law firm Wachtell, Lipton, Rosen & Katz to examine whether company secrets or national security had been compromised, CNBC reported. In an open letter, Huang apologized to his wife, family and the company. "I support the investigation and will cooperate fully," he wrote, AP reported.cnbc.com+2

The two are not related. According to The Times, Megaspeed bought more than $4.8 billion of Nvidia chips over two years. Democrats Sen. Mark Warner and Rep. Hakeem Jeffries have said they want to look into the matter further, AP reported. China's Foreign Ministry dismissed the spying allegations as a smear campaign, AP reported.pbs.org+1

Earnings ahead

Huang was back in the office this week, trying to project "business as usual" ahead of Nvidia's quarterly earnings on November 17, CNBC reported. Bank of America analyst Vivek Arya set out three scenarios for the stock. The worst case involves "adverse findings, leadership disruption or tighter restrictions requiring earnings reassessment."cnbc.com