Nvidia stock falls 5% as scrutiny turns to Jensen Huang’s affair with alleged Chinese spy

• Nvidia’s board opened an independent investigation after reports that CEO Jensen Huang had been targeted by a foreign intelligence effort.
• The stock fell on Monday as investors assessed leadership risk around Huang.
• It marks a "black eye moment" for Huang, said Yorkville Ives & Co.'s Dan Ives.

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Nvidia stock fell 5% on Monday after the tech giant launched an investigation into CEO Jensen Huang's relationship with a businesswoman who intelligence agencies say is a Chinese spy.

U.S. intelligence agencies said Alice Huang, an executive at cloud company MegaSpeed, has been passing information to Beijing, according to reports in The New York Times and The Financial Times.

Nvidia said its board has launched an independent investigation following the reports that Huang was the target of a "foreign intelligence effort."

Huang "fully supports the review and has committed to cooperating with it," the company said in a Sunday statement.

The co-founder and CEO told staff in an email that he had "fallen short" of his responsibility to serve his colleagues, the board, partners and shareholders around the world.

"I was unfaithful to my wife. My actions hurt her and our children. There is no excuse for what I did. I am deeply sorry," Huang said in the email.

China's Foreign Ministry spokesperson Guo Jiakun said on Monday the "so-called Chinese spy narrative" was unsubstantiated, Reuters reported.

Nvidia shares year-to-date.

Nvidia leadership under scrutiny

The probe has sparked questions about Huang's future as CEO of the company.

But any talk of replacing Huang is "comedy," Dan Ives, senior managing director at Yorkville Ives & Co., told CNBC's "Squawk Box Europe."

While the probe and affair is a "game changer" for the CEO and company, it doesn't alter the view that Nvidia remains two to three years ahead of China in AI chips, Ives said.

"You're talking about what I would view as a torchbearer — the leader of AI technology — not just in the U.S. but globally. So I think the fact that we're in this situation, from an investor perspective, the clear worry is, does Jensen stay on as CEO? The Street would say probably likely, but given the board investigation, anything could happen, and that creates a huge uncertainty."

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Tech stocks took a hammering last week as investors reassessed the data center build-out after Democrats won control of Congress.

Asian tech stocks rose across the region on Monday, rebounding from Friday's losses. Shares of U.S. chipmakers also climbed, with AMD, Marvell, Arm, Intel and Qualcomm rising on Monday.

Joachim Klement, investment strategist at Panmure Liberum, said the impact is currently contained to Nvidia.

But if Huang's position is "endangered," then "Nvidia might cut back on supporting other companies, whether it's in Asia or in the U.S., that might then spread a little bit more into the other semiconductor names," he said.

Support for Huang

U.S. President Donald Trump on Sunday praised Huang's leadership but said he hadn't spoken to the CEO about the investigation.

"I think he's an honorable guy. I think he probably has an excuse for it. You have to hear it," the president told reporters.

"He's done an amazing job for our country," Trump added.

Shaun Maguire, partner at Sequoia, also defended the tech giant CEO, saying in a post on X that Huang is "one of the greatest entrepreneurs of this generation."

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He added: "two mistakes don't make a right, and I believe Jensen is irreplaceable for America's AI leadership."

SpaceX and Tesla CEO Elon Musk reshared Maguire's post, adding that he agrees with the venture capitalist's statements.

Nvidia reports third-quarter earnings on Nov. 17 and will hold a major conference in Washington, D.C., at the end of the month.

— CNBC's Kif Leswing and Kamaron McNair helped contribute to this report.

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