Nvidia shares sink 8.6% as second affair report puts Jensen Huang’s job at risk

Dubai: Nvidia shares fell 8.6% in after-hours trading on November 11 after The New York Times (NYT) reported that CEO Jensen Huang had a second affair. The report names Kimberly Powell, the company’s vice president of healthcare, who reported directly to Huang.

The stock lost $14.95 to trade at $158.78. It had closed the regular session 2.92 per cent higher at $173.73. The sell-off adds to an already heavy month. Nvidia lost more than $1 trillion in market value in the month as the stock has lost  23.24 per cent. This was even before the board’s statement, and amidst a broader decline in AI stocks. Investors have since moved toward rivals or are completely moving away from AI/tech stocks.

The latest expose

NYT has divulged details after speaking with 5 people who work at Nvidia who have disclosed that Huang, 63, and Powell, 48, were filmed being affectionate at a San Jose hotel during the company’s developer conference in March. NYT doesn't claim to have seen the video and hence the allegations remain unverified.

Nvidia or its board haven't confirmed the claims and either has there been any statement from Powell.

Board under pressure

The NYT report came merely hours after The Wall Street Journal said the board is preparing to remove Huang. The Journal reported the directors are considering his removal. The board however, has not made any formal announcement yet. 

On November 8, the board opened an independent investigation into reports that allege that a foreign intelligence effort targeted Huang. A committee of independent directors, assisted by outside counsel, is overseeing the review. The board said it had no reason to believe US national security or company secrets were compromised. It also expressed confidence in Huang and said he would remain CEO. 

Ten of the board’s 11 members are independent. Nvidia has not said whether the investigation will now also examine the Powell allegations. The Times notes that Nvidia’s code of conduct tells employees to avoid conflicts of interest, including those arising from personal relationships.

Where the scandal stands

The Powell report follows weeks of coverage of Alice Huang, an executive at Singapore-based Megaspeed International. US intelligence officials believe she works for China’s Ministry of State Security, according to the Financial Times and NYT. The Times reported she was recruited to seek information and push for Nvidia’s advanced chips to reach China despite export restrictions.

Megaspeed has faced a US investigation for months over potential chip smuggling. Megaspeed and Nvidia have denied any wrongdoing, while Beijing has rejected the spying allegations. Huang admitted on November 8 that he was unfaithful to his wife and apologised to his family and employees. Those reports never established whether Huang knew of any intelligence ties.

Pressure is building in Washington. Republican House members have called on Huang to brief Congress. He is due at a closed-door briefing in mid-November, and Senator Elizabeth Warren is pressing him and the board for answers. 

Succession gap

Nvidia has no obvious successor. Huang has built the company’s position in AI chips, invested across the AI supply chain and become one of the industry’s most visible advocates for the technology. The company’s shares have climbed more than 700,000% under Huang since it went public with him at the helm as its founder and only CEO. 

Is his exit imminent? It's anyone's guess, as the board has made no announcement yet and is likely to take any decision only after deliberations. The next move depends on what the independent investigation finds and whether directors choose to widen the investigation to cover the new allegations.