Can Nvidia’s Huang Hold On Through a Spy Scandal?

In May, Nvidia CEO Jensen Huang told Singapore news channel CNA that he puts staff under the microscope “the same way Taiwanese parents torture people,” by subjecting them to relentless criticism.

After admitting to an extramarital affair with a woman US intelligence officials suspect was a Chinese intelligence asset, Huang should expect the criticism to 180 in his direction. The news sent Nvidia’s share price tumbling 4.3% on Monday and, with the allegedly honeypotted Huang now the subject of a company investigation, markets are wondering if he can hang on (probably) and if his indiscretion will hamper business (maybe).

An Ouster in the Cards

There has never been a US corporate infidelity scandal quite like this one. The national security element has placed the world’s second largest company at the center of an IRL spy novel, and the House Committee on Foreign Affairs wants Huang to appear for a closed-door briefing on November 18. President Donald Trump confirmed the FBI is looking into the matter, too, and said he spoke with Huang, who told him he had “absolutely no idea that the person in question was a spy.”

It’s unlikely that Huang’s affair will immediately impact Nvidia’s order book. In August, executives forecast a massive 70% revenue growth next year and financing demand for artificial intelligence, which relies heavily on Nvidia’s GPU chips, remains relatively robust. But Citi’s Atif Malik, while maintaining a buy rating on Nvidia’s stock, said investors should be mindful of “likely potential governance implications, increased regulatory scrutiny and export-control compliance of the flow of H200 chips into China (<1% of DC sales) and routed through other intermediaries, and long-term impact on leadership stability.”

Huang, who has led Nvidia since he cofounded it in 1993, is a human avatar for the company and arguably the most famous face of the AI boom. While making clear it’s currently unlikely, Morningstar analysts said the investigation and affair “may lead to Jensen Huang’s ouster.” They cautioned that “his departure could lead to less AI dealmaking and financing, greater regulation and more political backlash around artificial intelligence.” For now at least, the market is treating this as an isolated incident:

• The tech-heavy Nasdaq 100 rebounded 2.7% Monday after an up-and-down week following the midterm elections. Google debuted new variants of its own AI chips Monday, a sign of confidence in compute demand and that the AI race is proceeding undeterred.
• “It signals strong dip-buying investor appetite across the sector, coupled with market optimism that Nvidia’s issues remain contained,” said Mohamed A. El-Erian, an economist at the University of Pennsylvania’s Wharton School.

It Can Get Worse: New information is dropping fast, most of it bad for Huang. The New York Times reported that the US Commerce Department halted an investigation into Megaspeed, the Singapore-based firm where the woman he had an affair with was a director, after Nvidia intervened. The Financial Times reported she boasted to China-based investors of having access to Nvidia chips. Congressional hearings come with subpoena powers. Chris Coons, the Democratic Senator for Delaware set to chair the upper chamber’s Foreign Relations Committee told NPR investigating Huang is one of his top priorities. “This is a dynamic situation, and new information is much likelier to break against Jensen than in his favor,” said Alec Stapp, the co-CEO of the Institute for Progress, a D.C. public policy think tank. “Expect it to keep getting worse.”