Spy Scandal: Nvidia Drops 5 Percent in Premarket Trading
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Jensen Huang led Nvidia to become the first company worth $5 trillion, and now an affair has cost it about $230 billion in market value in a single morning: Nvidia shares fell 5.1 percent to $177.03 in premarket trading on Monday, even as the Nasdaq 100 was expected to open slightly higher. The trigger was the 63-year-old’s admission that he had been unfaithful to his wife, along with an investigation by Nvidia’s board. U.S. officials believe the woman, the Megaspeed executive Alice Huang, was spying for China’s Ministry of State Security. Despite sharing a surname, the two are not related: Huang (黄) is one of the most common family names in both China and Taiwan. Jensen Huang was born in Taiwan, while Alice Huang, also known as Huang Le, is a Chinese citizen.
How the Stock Has Moved Since the First Report
| When | Event | Price in dollars | Change |
|---|---|---|---|
| Early October | Record high (closing price) | 239.24 | |
| Late October | First New York Times report on Alice Huang | 213.66 | −0.8% |
| Next day | Weak results from Amazon and Intel | 204.64 | −4.2% |
| Last Wednesday | Congress asks Huang for a briefing | 200.13 | −3.2% |
| Thursday | A.I. selloff after the Democrats‘ midterm win | 181.60 | −9.3% |
| Friday | The Times: the suspected spy worked directly for China’s spy agency | 186.64 | +2.8% |
| Monday, premarket | Affair admission and board investigation | 177.03 | −5.1% |
Since the first report by The New York Times in late October, the stock has lost about 17 percent, and it is down 26 percent from its record high in early October. Nvidia’s market value has shrunk from about $5.16 trillion to roughly $4.27 trillion, a loss of about $880 billion.
Most of that decline has little to do with the affair, though. Through Friday, Nvidia was down 12.6 percent since the first report, a better showing than its rivals: The VanEck Semiconductor ETF lost 17.4 percent over the same period, AMD 20.7 percent, Broadcom 14.9 percent and TSMC 13.1 percent. The main drivers were worries about A.I. spending and the A.I. bloodbath after the Democrats‘ election win, from which the sector only partly recovered on Friday. Only on Monday did the stock clearly react to the case itself, moving against the broader market.
What Analysts Are Saying
„The market’s probably telling you now this does no favours to the stock whatsoever,“ said Chris Weston, head of research at the broker Pepperstone, according to Reuters. Josh Gilbert, an analyst at eToro, said a cloud over Mr. Huang was also a cloud over the stock: „Any doubt over his position is going to matter to shareholders.“ Analysts at Citi named potential governance implications, increased regulatory scrutiny and export-control compliance as the key issues for investors, including the flow of H200 chips into China through intermediaries.
Then there is the dependence on one man. Mr. Huang co-founded Nvidia in 1993 and, according to The FT, runs it with a flat structure in which dozens of executives report directly to him. Few tech companies are as closely tied to their chief executive. Gary Black, managing partner of The Future Fund, has publicly said he doubts Mr. Huang can remain chief executive and expects many portfolio managers to reduce their Nvidia holdings.
What May Have Reached China
What information Alice Huang actually passed to Beijing is unknown. According to The Times, it is not clear what she passed along or what its value to China was. But the reporting so far points to four possible channels.
The first is technology. According to The Times, the aim of the operation was to learn more about Nvidia’s most advanced hardware. Nvidia counters that customers like Megaspeed receive only ordinary business information.
The second is policy in Washington. Mr. Huang is one of President Trump’s favorite executives and has accompanied him on state visits, including to China this year. The Times raised the possibility that Mr. Huang had insights into Mr. Trump’s thinking on China. How early the administration knew is shown by another Times report: Secretary of State Marco Rubio oversaw a classified memo this spring that warned senior administration officials, ahead of Mr. Trump’s summit with Xi Jinping in May, about Mr. Huang’s intimate relationship with the suspected spy. It was based on electronic surveillance of Alice Huang. Even so, Mr. Trump brought the Nvidia chief along: Mr. Huang was initially left off the business delegation and, after a call from the president, joined Air Force One during a refueling stop in Alaska. Whether that decision was connected to the warning is unclear. Some administration officials had long been concerned about Mr. Huang’s influence on Mr. Trump’s approach to A.I. policy, according to The Times. The White House, the State Department and the C.I.A. declined to comment.
The third is influence. China’s spy agency reportedly tasked Alice Huang with persuading the Nvidia chief to lobby for exports of advanced chips to China. Mr. Huang did lobby Mr. Trump repeatedly, and Mr. Trump eventually allowed exports of the older H200 chips, with the U.S. government taking a cut of sales. According to The FT, the deal had little effect on Nvidia’s revenue because Beijing pushed back against the chips, but it angered China hawks in the administration.
The fourth is the chips themselves. Megaspeed’s sister company in Malaysia bought at least $4.8 billion worth of A.I. equipment containing Nvidia chips between June 2024 and February 2026, according to The Times. Megaspeed rents computing power to Alibaba and other Chinese companies, and investigators suspect that some of the chips ended up in China illegally. The case has since been handed to the Justice Department.
Whether Jensen Huang knew who he was dealing with is also unclear. When Mr. Trump was first briefed last year, U.S. officials did not believe Mr. Huang knew about the spying, according to The Times. Some senior administration officials now doubt he could have remained unaware. „It is vital that Jensen Huang address our national security concerns in Congress related to China’s access to sensitive technology and information,“ said John Moolenaar, the Republican chairman of the House China committee.
Crucial Days for Nvidia
Mr. Huang is due to tell the committee chairmen by Wednesday whether he will attend a closed-door briefing scheduled for next week. Nvidia also reports quarterly results next week, with revenue guidance of about $108 billion that excludes data center sales in China. By then at the latest, Mr. Huang is likely to face public questions about the case.
More Form Than Substance?
Some see the case as less dramatic for the stock. Analysts at Bernstein led by Stacy Rasgon called the espionage allegations „(so far) more form than substance, though a (very) bad look,“ according to Investing.com, while adding: „At a minimum we suspect the overhang is going to be around for a while.“ The board says it has „no reason to believe that either national security or NVIDIA secrets were compromised.“ After the slide, Nvidia trades at only about 15 times expected earnings, according to the analysis platform Tikr. Mr. Weston of Pepperstone does not expect Mr. Huang to be replaced.
Support has also come from politics and the tech world. Mr. Trump called Mr. Huang „an honourable guy“ and said, „I think he probably has an excuse for it.“ Elon Musk agreed with a post calling Mr. Huang irreplaceable for America’s A.I. leadership. Beijing has dismissed the reports as smears against China. So far there is no evidence that confidential information actually reached China, and the allegations rest on anonymous sources in the U.S. government.
