Share price tumbles as Nvidia investigates CEO and 'foreign intelligence'

Shares of Nvidia have tumbled more than 5 per cent after the computer chip maker opened an investigation into reports that CEO Jensen Huang was the "target of a foreign intelligence effort".

Nvidia's announcement of the investigation followed Mr Huang's acknowledgement that he had been intimate with a business executive who, according to The New York Times, US intelligence determined was gathering information for China.

China's Foreign Ministry dismissed the spying allegations as a smear campaign against Beijing.

Nvidia chips power many of the data centres and computing systems used to train and run AI models.

Its advanced processors have also been a focus of US export restrictions aimed at limiting China's access to cutting-edge semiconductor technology.

There's a small chance Mr Huang is removed or steps down as CEO, wrote Dan Ives, partner and senior managing director at Yorkville Ives & Co., saying Mr Huang is "not replaceable".

"On the heels of last week's blue tidal wave, [in the midterms elections] this will also increase momentum for more regulatory scrutiny in the Beltway, especially around China and chip restrictions, at a time the AI arms race is heating up into its next gear between the US and China," Ives wrote.

Still, Mr Ives said there is a risk, as Mr Huang could be removed as CEO depending on the board's investigation and that it will remain an overhang on shares near term.

Shares of Nvidia and other major AI companies have sold off steadily since early October on growing fears of a bubble in the sector.

Nvidia has fallen 23 per cent in the past 30 days, including Monday's sell-off, local time in New York.

Nvidia's stock slid $US10.48 to $US176.16. Shares hit an all-time high last month.