Nvidia’s independent directors have hired former acting U.S. Attorney Joon H. Kim and his firm, Wachtell, Lipton, Rosen & Katz, to investigate Chief Executive Jensen Huang’s relationship with an alleged Chinese spy, the board said in a statement released overnight into Wednesday, Nov. 11.[1] The hire came after Nvidia shares fell 5.47% on Tuesday, their second straight daily loss.[2]
Related: Nvidia Board Opens Independent Investigation After Reports CEO Jensen Huang Was a Spy Target.
Who will run the investigation
Kim previously served as acting U.S. Attorney for the Southern District of New York.[1] The board said Kim and Wachtell would conduct “a thorough and independent investigation as was announced on Sunday.”[1]
Wachtell is a major corporate law firm.[4] Twitter hired it in 2022 to force Elon Musk to complete his $44 billion takeover of the company.[4]
The inquiry centers on Huang’s affair with Alice Huang, an executive at Nvidia customer Megaspeed.[2] The two are not related.[3] The New York Times reported on Oct. 29 that U.S. officials had concluded she was a Chinese intelligence asset.[2] Beijing has denied running an espionage operation aimed at Huang.[4]
Huang told staff in an email on Sunday that he had been “unfaithful” to his wife.[2] He did not name the person involved.[3] “I support the investigation and will cooperate fully,” Huang said in an open letter posted on Nvidia’s website.[3]
Two days of losses
Nvidia shares closed more than 4% lower on Monday.[2] The stock briefly dipped below $4 trillion in market value on Tuesday afternoon, then closed above that level.[2] Nvidia was valued at $4.07 trillion after the two declines, down from $4.50 trillion before the story broke, The Guardian calculated.[4]
Rival chipmakers gained.[2] AMD rose 1.3% on Tuesday after a 13% gain on Monday.[2] Broadcom added nearly 4% on Tuesday after rising just over 10% on Monday.[2]
Nvidia shares were up almost 5% in premarket trading on Wednesday morning.[4]
Dan Ives, managing director at Yorkville Ives & Co, said in a Tuesday note that investor chatter assigned “roughly a 15% chance he is removed as CEO.”[2] Ives said he expected the board investigation to take four to six weeks.[2]
Shareholder lawsuit filed
A shareholder filed a proposed class-action lawsuit against Nvidia and Huang in federal court in San Jose, California.[2] The suit was brought by the Rosen Law Firm.[2] It was filed five minutes after the U.S. stock market closed on Monday.[3]
The complaint alleges that Nvidia and Huang made false or misleading statements about the affair and about Nvidia’s relationship with Megaspeed.[2] The allegations have not been tested in court. Retail investor Mark Kistenmacher leads the plaintiffs, who are seeking unspecified damages.[3]
The suit cites a statement Nvidia gave The New York Times last month describing Huang’s interactions with Alice Huang as “not unusual or unexpected.”[3] Megaspeed said last year that it had acted in compliance with all applicable laws, including U.S. export controls.[3] Nvidia and Megaspeed did not immediately respond to The Guardian’s request for comment on the lawsuit.[3]
Washington weighs in
President Donald Trump said on Monday that the FBI was looking into the matter.[2] “I think that he’ll be in good shape,” Trump told reporters at the White House.[2]
U.S. Ambassador to China David Perdue told Bloomberg Television that relations with Beijing were “bumpy right now.”[4] “Economic security is national security,” Perdue said.[4]
For more coverage of the company and its rivals, see The Boston Report’s AI companies guide, the AI news hub and the Business & Finance section. Earlier: Huang Affair Raises Nvidia’s Succession Question.
Sources
- Nvidia Newsroom: Statement From the Independent Members of the NVIDIA Board
- CNBC: Nvidia sells off for second day in fallout from Jensen Huang’s affair with alleged spy
- The Guardian: Nvidia and Jensen Huang sued in US over affair with alleged Chinese spy
- The Guardian: Nvidia’s value tumbles by $430bn since spy allegations, as major US law firm hired to investigate claims – business live
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