Nvidia briefly slips behind Microsoft in market value as shares tumble 10% amid Jensen Huang controversy

Scandal-hit Nvidia shares tumbled again on Tuesday at the US stock market as the chipmaker lost nearly 10% market value in past two trading sessions, AFP reported.

Nvidia's shares fell 5.5% after a 4.3% drop on Monday. It briefly slid below Microsoft in market valuation but was able climb back at second place behind Apple.

The decline wiped out nearly $430 billion from Nvidia's market capitalisation over two sessions, as reports about CEO Jensen Huang's alleged relationship with a Chinese businesswoman suspected of being a Beijing spy raised concerns about the company's operations and corporate governance.

Quick answers to key questions

•5 QUESTIONS

1

Why did Nvidia shares fall nearly 10% over two trading sessions?⌵

Reports about CEO Jensen Huang’s alleged relationship with a woman suspected of being a Chinese spy raised concerns about Nvidia’s operations and corporate governance. Investors were also concerned about whether heavy AI investments would generate sufficient returns.

2

Did Nvidia briefly fall behind Microsoft in market value?⌵

Yes. Nvidia briefly slipped below Microsoft in market valuation after its shares fell, but it climbed back to second place behind Apple.

3

What are the allegations about Nvidia chip shipments to China?⌵

Reports alleged that Alice Huang used connections and a network of companies to help route Nvidia chips to China, including around 240,000 H100, H200 and some A100 chips. The reported shipments were estimated to be worth about $7.5 billion.

4

Is Nvidia investigating the allegations involving Jensen Huang?⌵

Yes. Nvidia’s independent directors appointed external legal counsel to lead an investigation, and Jensen Huang said he was willing to cooperate. The FBI is separately examining whether he was targeted in a foreign intelligence operation.

5

Did Nvidia say its national security or confidential information was compromised?⌵

No. Nvidia said its board had no reason to believe that US national security or the company’s confidential information had been compromised.

The controversy intensified on Tuesday after reports alleged that the relationship helped facilitate at least $7.5 billion worth of Nvidia chip shipments to China.

Senate Democratic Leader Chuck Schumer called on the administration to provide answers and tighten restrictions on chip exports to China. Meanwhile, Nvidia's independent directors have appointed external legal counsel to investigate the allegations, according to a Reuters report.

The developments have raised questions about the company's governance and its dependence on Huang, who has led Nvidia for more than three decades. The 63-year-old executive owns around 3.6% of the company and oversees an unusually flat organisational structure, with dozens of senior executives reporting directly to him.

The Federal Bureau of Investigation (FBI) is separately examining whether Huang was targeted as part of a foreign intelligence operation. Huang has acknowledged being unfaithful to his wife in a conversation with employees but did not disclose details about the relationship.

Huang apologised to senior executives during a closed-door meeting on Monday before turning the discussion towards business, CNBC reported. He returned to meetings at Nvidia's headquarters on Tuesday.

Nvidia said its board had no reason to believe that US national security or the company's confidential information had been compromised. The company added that Huang was willing to cooperate with the internal investigation.

The board has appointed Joon Kim, a partner at law firm Wachtell Lipton and former acting US Attorney for the Southern District of New York, to lead the investigation. Kim's practice includes internal investigations and white-collar defence.

Nvidia shares had been largely unchanged this year before the allegations emerged but have since fallen 9.5%, according to Reuters. The stock has also faced pressure from broader investor concerns over whether heavy investments in artificial intelligence will generate sufficient returns.

According to a New York Times report, Marco Rubio had briefed US President Donald Trump aboard Air Force One in May, while the US president was travelling to China, about intelligence suggesting Huang was involved with a woman suspected of being a Chinese spy. The report said this was at least the second time in seven months that Trump had received such information.

Trump also said he was unaware of the alleged connections when Huang accompanied him on his China visit in May.

The Information reported that Alice Huang, also known as Huang Le, worked with her husband and sister to build a network of companies across China and Singapore to procure Nvidia chips.

According to the report, Alice Huang used her connections at Nvidia to secure supplies when orders for chips subject to US export restrictions were held up. The report alleged that this helped move around 240,000 H100, H200 and some A100 chips into China. Some of these chips were eventually supplied to Alibaba, Tencent and smaller Chinese artificial intelligence companies.

Alice Huang previously held senior positions at an investment firm in Shanghai before becoming the controlling shareholder of Singapore-based cloud computing company Megaspeed International.

Megaspeed was linked to China-based Century Litong, which secured preferred cloud partner status with Nvidia in 2023, giving it priority access to the chipmaker's products, The Information reported.

According to a Financial Times report, several US government agencies had pushed for Megaspeed to be placed on the Entity List, a trade blacklist covering organisations considered national security risks by Washington because of their connections to China.

However, the US Commerce Department had delayed efforts to blacklist the company while seeking additional information about some firms under consideration, the report said. It was unclear whether Megaspeed was among the companies being reviewed.

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