Nvidia, the company at the centre of the artificial intelligence boom, faced one of the most unusual governance crises in corporate history on Monday, November 9, as investors weighed reports that its founder and chief executive had been the target of a foreign intelligence operation.
The world's most valuable chipmaker's shares closed down 4.27% at $178.67, from $186.64 on Friday, according to StockTitan. The decline erased roughly $192 billion of market value, based on about 24.1 billion shares outstanding, with some estimates putting the loss above $200 billion.
The sell-off followed a statement released by Nvidia's board on Sunday, November 8, saying it was "initiating an independent investigation" after recent reports that Jensen Huang had been the target of a foreign intelligence effort, according to the statement published on GlobeNewswire.
What the board said
The board said a committee of independent directors, assisted by outside independent counsel, will oversee the investigation. It emphasised that it places a priority on US national and economic security.
The board said it has no reason to believe that national security or Nvidia secrets were compromised, but that the inquiry would examine all available information. "Jensen fully supports the review and has committed to cooperating with it," the board said. It added that it has confidence in Huang and his leadership team, and would provide updates as appropriate.
Huang's admission
The reports that triggered the review concern Huang's personal life. According to Fortune, the woman with whom Huang had an affair has been identified in a series of reports as a suspected Chinese spy.
Huang acknowledged the relationship. "I was unfaithful to my wife. My actions hurt her and our children. There is no excuse for what I did," he said, according to Fortune. He apologised, said he had "fallen short" of his responsibility to Nvidia and pledged to work to earn back the confidence of the board, partners and shareholders.
The Chinese government denied any involvement, describing the reports as "nothing but smears," according to Fortune. The allegations have not been proven, and Nvidia has announced no change in its leadership.
The market reaction
The decline in Nvidia's shares stood out on a day when the broader market rallied strongly. The S&P 500 rose 2.35%, its best day since April 8, and the Nasdaq Composite gained 2.74%, as investors bought technology stocks after a sharp sell-off the previous week, according to StockTitan. Rival chipmaker AMD rose 13.26% after an upgrade by Oppenheimer.
"The impact is currently contained to Nvidia," said Joachim Klement, an analyst at Panmure Liberum, according to CNBC as cited by StockTitan.
Daniela Hathorn, senior market analyst at Capital.com, said speculation about leadership uncertainty at Nvidia "could unsettle investors," according to TheStreet.
Huang's personal fortune has also fallen. His net worth dropped from just over $171 billion early last week to about $150.9 billion on Thursday, according to the Bloomberg Billionaires Index cited by Fortune, before rebounding slightly. Nvidia's shares were down 18.6% over the past month, a period that also included a broad sell-off in AI stocks.
The succession question
Huang co-founded Nvidia in 1993 and has led it ever since, transforming it from a maker of graphics chips for video games into the dominant supplier of the processors that power artificial intelligence. He is the company's largest individual shareholder, and his public profile is closely linked to Nvidia's identity.
