Report ties Huang affair to $7.5B in Nvidia China chips

Nvidia's ↘ 6.48% board has opened an independent investigation after reports that founder and CEO Jensen Huang was "the target of a foreign intelligence effort." Huang has admitted to an affair with a businesswoman whom U.S. officials believe spied for Beijing. The scandal cost the chipmaker about $190 billion in market value on Monday, November 9, and the company now also faces a shareholder lawsuit and an FBI inquiry.

In a statement dated November 8, the board said a committee of independent directors, working with outside counsel, will run the review. It said it had "no reason to believe that either national security or NVIDIA secrets were compromised" but that the inquiry "will examine all available information." It also said it has confidence in Huang. In a message to employees, Huang wrote, "I was unfaithful to my wife. My actions hurt her and our children. There is no excuse for what I did," according to the BBC. The message did not name the woman. A company spokesperson said Huang will keep leading Nvidia "without interruption," ABC7 reported.abc7chicago.com+2

The alleged intelligence operation

The New York Times ↘ 0.29% reported last month that U.S. intelligence had concluded Alice Huang, a former executive at Singapore-based Megaspeed, was passing information to Beijing. U.S. agencies found the relationship through surveillance of her, the Inquirer reported, citing the Times. The two are not related. Megaspeed, an Nvidia customer, has been accused of helping restricted Chinese firms get Nvidia AI chips. CNBC Comcast Corporation ↗ 1.43% reported that U.S. officials believe Alice Huang works for China's Ministry of State Security. On Tuesday, The Information reported that the affair helped move at least $7.5 billion in Nvidia chips. Reuters Thomson Reuters Corporation ↗ 0.66% said it could not independently confirm that report. China's Foreign Ministry called the allegation "nothing but smears against China".inquirer.com+3

President Trump said Monday that the FBI is "looking into" the matter. He said Huang told him by phone, "I had no idea that she was a spy," and added, "I really believe him". Republicans on the House China select committee have asked Huang to attend a closed-door briefing on November 18.abc7chicago.com

Market fallout and lawsuit

Nvidia shares closed down 4.3% on Monday. Five minutes after the closing bell, a proposed class action was filed in federal court in San Jose. It accuses Nvidia and Huang of hiding the relationship from shareholders. The shares kept falling Tuesday morning.uk.finance.yahoo.com+1

Other chip stocks rallied anyway. On Monday the Nasdaq-100 rose 3.4% and the Philadelphia Semiconductor Index PHLX Semiconductor Index ↘ 1.77% jumped 7%, even as Nvidia lost about $200 billion in value, CNBC's Mike Santoli wrote. He said he had no "clear sense of what the various Nvidia investigations will mean for its China sales, leadership or long-term earnings power."cnbc.com