Nvidia shares slump amid investigation into CEO Jensen Huang

Nvidia stock tumbled in early trading after the company launched an internal investigation into whether CEO Jensen Huang had been targeted by a Chinese intelligence operation.

News of the probe into the California-based semiconductor giant sent its stock tumbling over 4 percent as United States financial markets opened for the week, while tech stocks and wider indexes rose.

The probe comes amid reports that Huang developed a close personal relationship with a Chinese business executive of a Nvidia partner company who allegedly passed information to Beijing. In a letter to employees, Huang admitted to not being faithful to his wife, but did not elaborate on the details of the relationship.

“NVIDIA’s Board of Directors has initiated an independent investigation. I support the investigation and will cooperate fully,” Huang said in the letter.

On Sunday, the firm announced the investigation. “The Board prioritizes U.S. national and economic security, which is paramount to the interests of NVIDIA and its shareholders,” the company said in a statement.

“While the Board has no reason to believe that either national security or NVIDIA secrets were compromised, the Board’s inquiry will examine all available information.”

The investigation puts Huang’s future in the spotlight at a company with a market capitalisation of $4.5 trillion. Huang is Nvidia’s fifth-largest shareholder, owning 3.6 percent of the company, according to LSEG data. However, Nvidia’s co-founder does not have majority voting control, unlike executives at other companies in the sector, such as Meta and SpaceX.

The tech-heavy Nasdaq was not affected by Nvidia’s downturn on Monday, with the index up 2.7 percent in early trading. Microsoft rose 2.2 percent, with chip maker AMD trading up over 10 percent on a new deal with Google and a stock analyst’s upgrade. Digital and e-commerce giant Amazon rose 3.8 percent.

The Dow Jones Industrial Average was up 1.7 percent, and the S&P 500 rose 2.1 percent.

Analysts are sceptical that the controversy surrounding Huang will lead to him stepping down.

“Founder-led companies outperform because one person carries the vision,” Michael Monaghan, portfolio manager of Founders 100 ETF, told Al Jazeera.

“Based on the current information, I would see that as highly improbable [that he is removed].”

This is not the first investigation into Huang’s relationships in recent months. In October, The New York Times reported that the CEO had a relationship with the alleged China operative, Alice Huang, a former executive at the Singapore-based company Megaspeed. The two Huangs are not related.

Megaspeed, a data centre and cloud computing company, described itself as “a core business partner of NVIDIA’s computing power cloud business in the Asia-Pacific region” on its website.

US authorities investigated and concluded that Alice Huang was a Chinese intelligence asset, although the Chinese government pushed back against those allegations.

“The so-called Chinese spy narrative is purely a groundless accusation, slander, and a smear,” Chinese Foreign Ministry spokesperson Guo Jiakun told reporters in Beijing.

The developments come amid a rough week for artificial intelligence (AI) investors on Wall Street. After markets settled following definitive results in the US midterm elections, candidates who ran on anti-AI platforms won overwhelmingly, giving Democrats, who are more critical of the AI industry than their Republican colleagues, control of both the House and the Senate in the new Congress.

Additionally, all but one of the data centre ballot measures seeking to restrict construction of new facilities across the US passed, sending shares of major AI firms tumbling on Thursday before they rose again on Friday.

“Jensen has two sets of enemies in Washington: China hawks who want the export door shut, and the crowd trying to stop the data centre buildout. The longer this drags, the stronger they get,” Monaghan told Al Jazeera.