Nvidia shares dropped roughly 4% on Tuesday for the second consecutive session, as investors and lawmakers weighed the compounding fallout from CEO Jensen Huang's admission of an extramarital affair with Alice Huang, an executive at Singapore-based Megaspeed who U.S. officials have identified as a Chinese intelligence asset.
Huang disclosed the relationship to staff in an email on Sunday, writing that he had been "unfaithful" to his wife and had "fallen short" of his responsibilities as CEO. The shares had also closed more than 4% lower on Monday, the day the email became public.
The New York Times, which on Oct. 29 reported that U.S. officials had concluded Alice Huang was "a Chinese intelligence asset, funneling information to Beijing" and "possibly steering advanced Nvidia A.I. chips to China," first identified her connection to China's Ministry of State Security, citing people briefed on intelligence circulated in a Trump administration memo in the spring. China has called the allegation a smear.
The scandal has intensified attention on Nvidia's existing and complicated relationship with China. Before the Biden administration announced sweeping export controls in October 2022, China accounted for nearly a quarter of Nvidia's revenue. In the most recent fiscal year, the company reported that approximately 9% of its revenue — including Hong Kong — still came from China, covering segments such as gaming, auto, and industrial in addition to restricted data center chips. China represented 8% of revenue in the most recent quarter.
Megaspeed, the Singapore-based Nvidia customer linked to Alice Huang, has separately been accused of diverting restricted AI chips to Chinese companies. Megaspeed denies wrongdoing and has said inspections found no evidence of violations.
Questions about Huang's direct influence over U.S. export policy have added a political dimension to the corporate crisis. Jensen Huang has been closely aligned with President Donald Trump during his second administration, advising the White House on AI safety regulations while also advocating for looser restrictions on chip sales to China. In December, Trump said Nvidia would be permitted to ship its H200 chips to China provided the U.S. received a 25% cut of sales. By March, Huang told reporters that Nvidia had "received purchase orders, and we're in the process of restarting our manufacturing."
Huang was also a last-minute addition to a roster of tech executives who joined Trump on a trip to China in May, after the president was briefed on intelligence concerns, according to the Times.
"In 35 years, I haven't seen a chip CEO with this much direct influence on export policy," Patrick Moorhead, CEO at Moor Insights & Strategy, said in an email.
Trump said Monday he was "amazed" by the allegations and that Huang had told him he "had no idea that she was a spy." The president added that the FBI is investigating, while offering a measured defense: "I think he'll be in good shape."
The legal pressure is mounting as well. The Rosen Law Firm filed a class-action shareholder lawsuit against Nvidia and Huang in federal court in San Jose, California, alleging the defendants made false or misleading statements about Huang's affair and Nvidia's relationship with Megaspeed, thereby creating a material risk to the company's reputation and business prospects.
Dan Ives, senior and managing director at Yorkville Ives & Co., said in a Tuesday note that "the Street and investor chatter is assigning roughly a 15% chance he is removed as CEO of Nvidia with a high probability (85%) he stays on as CEO after the Board investigation is completed." Ives added that he would "expect a Board investigation that could take 4 weeks to 6 weeks and will create a clear overhang on the stock until more news emerges from Nvidia."
Three House committees have already requested closed-door briefings with Huang about his relationship with Megaspeed. Democratic lawmakers, who swept last week's midterm elections and are set to take control of both the House and Senate, have said publicly that Congress will investigate. The convergence of a federal criminal inquiry, congressional oversight, shareholder litigation, and a pending board investigation signals that the pressure on Nvidia's leadership is unlikely to ease in the near term.
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