KEY POINTS

• Nvidia shares fell 4.58 per cent in premarket trading on Monday after the company announced an independent investigation involving CEO Jensen Huang.
• The probe follows reports that a Chinese businesswoman with links to Huang was allegedly an intelligence asset for Beijing.
• Huang admitted to having an extramarital affair but did not disclose details of the relationship.
• His daughter, Nvidia executive Madison Huang, cancelled planned engagements in South Korea.
• South Korea’s government expects no disruption to contracted deliveries of Nvidia chips.

MAIN STORY

Nvidia shares fell 4.58 per cent in premarket trading on Monday as an investigation into reports involving chief executive Jensen Huang raised questions about his future at the artificial intelligence chipmaker.

The stock dropped to $178.09 from its previous Nasdaq closing price of $186.64, extending concerns among investors after Nvidia’s board announced an independent investigation on Sunday.

The inquiry follows a New York Times report that Huang had a close relationship with Alice Huang, a former executive of Singapore-based Megaspeed, who US authorities reportedly investigated and concluded was a Chinese intelligence asset.

The woman is not related to Jensen Huang. The report alleged that she may have shared information with China’s ruling party.

Huang acknowledged having an extramarital affair in an email to employees but did not disclose details of the relationship or address the espionage allegations directly.

The board said an independent committee, assisted by external legal counsel, would examine all available information. It added that it had no reason to believe Nvidia’s trade secrets or US national security interests had been compromised.

THE ISSUES

The investigation has drawn attention to Huang’s position because of his central role in Nvidia’s growth and its dominance in the artificial intelligence chip market.

Investors are concerned that a prolonged inquiry could affect the company’s leadership, business decisions and relationship with US authorities over chip exports to China.

Chris Weston, head of research at brokerage Pepperstone, said the controversy was weighing on the stock at a time when investors were already debating the scale of investment in data centres.

However, he did not expect Huang to be replaced, describing him as the “godfather of AI”.

The impact also reached South Korea, where Madison Huang, Jensen Huang’s daughter and an Nvidia executive, cancelled a planned visit to Seoul for meetings with local technology companies.

South Korean AI startup Rebellions said its planned engagements with Madison Huang were cancelled due to “unavoidable internal circumstances at Nvidia”. A separate Nvidia AI Day Seoul conference was expected to proceed as scheduled.

WHAT’S BEING SAID

“The market’s probably telling you now this does no favours to the stock whatsoever in a time when there’s a lot of conjecture as to the build out of data centres,” Chris Weston, head of research at Pepperstone, said.

US President Donald Trump, who was reportedly briefed about the intelligence findings roughly a year ago, said he had not discussed the allegations with Huang.

“I think he’s an honorable guy. I think he probably has an excuse for it. You have to hear it,” Trump said.

WHAT’S NEXT

The investigation’s findings will be important in determining whether the allegations have implications for Huang’s leadership and Nvidia’s business relationships.

Analysts have warned that a prolonged internal review could delay investment decisions or product launches, with possible consequences for the wider semiconductor industry.

Ryu Young-ho, a senior analyst at NH Investment & Securities, said competitors such as Advanced Micro Devices could attract more attention in the short term. He added, however, that Nvidia’s products would be difficult to replace.

South Korea’s deputy science minister said the government expected no disruption to contracted deliveries of Nvidia graphics processing units despite the company’s current difficulties.

BOTTOM LINE

Nvidia’s immediate challenge is to establish whether the allegations have any implications for corporate security or national interests while managing uncertainty around its chief executive. The investigation has already put pressure on the company’s shares, but its longer-term effect will depend on what the board discovers and whether the findings affect Huang’s position.

Reuters