Nvidia CEO Jensen Huang Sued Over Disclosure of Spy Affair

Jensen Huang and Nvidia face a shareholder lawsuit alleging that executives misled investors regarding the national security implications of the CEO's romantic relationship with a suspected Chinese spy. Mark Kistenmacher, a retail investor, filed the complaint in a California court on Monday. The suit seeks unspecified damages and a jury trial. It aims to represent a class of investors who purchased Nvidia shares between October 9 and November 8.

The legal action follows media reports that U.S. intelligence determined Alice Huang, a former executive at Megaspeed International, was gathering information for Beijing. The New York Times first reported that the pair had socialized in Taiwan on October 9. On November 8, Nvidia stated it was investigating reports that Huang was the target of a foreign intelligence effort. The complaint asserts that Nvidia issued false statements about its relationship with Megaspeed during this period.

News reports indicated the Commerce Department was investigating Megaspeed, a Singapore-based firm, for suspected help in sidesteeping U.S. export restrictions on Nvidia chips. At that time, Nvidia said its compliance team checked the matter and determined Megaspeed was not doing anything illegal. The complaint argues these statements were misleading because Huang was having an affair with Alice Huang, who is suspected of seeking to help smuggle Nvidia products into China.

The suit claims the failure to disclose the affair and the issuance of false statements posed a material risk to Nvidia's reputation and business prospects. The plaintiff argues that investors would not have purchased Nvidia shares at the prices paid if they had known the truth. The complaint states that the wrongful acts and omissions led to a precipitous decline in the market value of the company's securities, causing losses for the class members.

Nvidia shares fell $7.97, or 4.3%, on Monday. This drop wiped out approximately $190 billion in market value. Shares were down again Tuesday before the opening bell. Nvidia did not immediately respond to a request for comment. The company is one of the world's most valuable firms, driven by demand for microprocessors used in cloud computing and data centers that underpin the artificial intelligence boom.

President Donald Trump said on Monday that the FBI is investigating the affair. He noted that Huang told him he had no idea the person could be involved in espionage. Trump added that he does not think Huang needs to worry, stating, "he'll be in good shape." The episode is also attracting congressional scrutiny. Sen. Mark Warner and Rep. Hakeem Jeffries said Monday they are interested in investigating the matter further.

The affair is being scrutinized by Nvidia's board. Huang acknowledged the relationship and apologized in an open letter posted on Nvidia's website. He addressed his wife, family, and the company. He stated, "I support the investigation and will cooperate fully. I love our country and our company. I am committed to protecting NVIDIA and supporting America’s national security."

Megaspeed bought more than $4.8 billion worth of Nvidia chips over the past two years, according to The New York Times. Alice Huang is a common Chinese surname, and the two Huangs are not related. The complaint describes the relationship as a material risk to the company's prospects. The class period for the lawsuit ends on November 8, the day Nvidia announced it was investigating the foreign intelligence reports.