Nvidia shares fell 4.3% Monday, erasing about $190 billion in value
Retail shareholder Mark Kistenmacher sued Nvidia and chief executive Jensen Huang on Monday in a California court, accusing the chipmaker and its CEO of deceiving investors in their responses to media reports about Huang’s affair with Alice Huang, whom news reports have said is suspected of working for Chinese intelligence. The complaint alleges that Nvidia and Huang failed to disclose the affair and issued false statements about Nvidia’s relationship with Alice Huang’s company, Singapore-based Megaspeed. Nvidia did not immediately respond to a request for comment.
The suit seeks unspecified damages and a jury trial on behalf of investors who bought Nvidia shares from October 9, when The New York Times first reported the pair socializing in Taiwan, through November 8, when the company said it was investigating reports that Huang was the “target of a foreign intelligence effort.”
The complaint argues that statements Nvidia made about Megaspeed were misleading because they were made while Jensen Huang was having an affair with Alice Huang, who is “suspected of seeking to help smuggle Nvidia products into China.” It says the undisclosed relationship and the company’s public statements about Megaspeed created a “material risk” to Nvidia’s reputation and business prospects.
The lawsuit follows news reports that the Commerce Department was investigating Alice Huang’s company, Megaspeed, on suspicions that it was helping to sidestep U.S. export restrictions blocking Nvidia chips from being sold to China. Nvidia said then that its compliance team checked and determined that Megaspeed wasn’t doing anything illegal.
The New York Times reported that U.S. intelligence determined that Alice Huang, a former executive of Megaspeed International, was gathering information for Beijing, and that Megaspeed bought more than $4.8 billion worth of Nvidia chips over the past two years, according to The Times. Huang is a common Chinese surname, and the two are not related.
The affair has raised concerns that Beijing is seeking access to Nvidia’s cutting-edge microchips, which power the development of artificial intelligence but face export restrictions to China.
Nvidia shares fell on Monday. The stock dropped $7.97, or 4.3%, wiping out about $190 billion in market value, and the shares were down again Tuesday before the opening bell.
The complaint ties those declines to the defendants’ conduct. “As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages,” the complaint said. Had investors known the truth, they wouldn’t have purchased Nvidia’s shares “at the artificially inflated prices that they did, or at all,” according to the complaint.
The complaint comes after President Donald Trump said the FBI is investigating the affair, which Huang has acknowledged and apologized for. Trump said Monday that Huang told him he had no idea the person could be involved in espionage. Speaking at a White House briefing, Trump said the FBI is “looking into” the affair, but added that he doesn’t think Huang needs to worry, saying “he’ll be in good shape.”
The affair is also being scrutinized by Nvidia’s board. Huang apologized to his wife, family and the company for the affair in an open letter posted on Nvidia’s website. “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,” Huang said in the letter.
The episode is also starting to attract congressional scrutiny, with top Democrats Sen. Mark Warner and Rep. Hakeem Jeffries saying Monday they are interested in investigating it further.
Huang is one of the world’s wealthiest people, thanks to booming demand for his company’s microprocessors, which are in huge demand for cloud computing and data centers that underpin the AI boom. Nvidia is one of the world’s most valuable companies, and its chips face export restrictions to China — the same restrictions at issue in the Commerce Department’s Megaspeed investigation.
The claims in Kistenmacher’s complaint have not been tested in court. Nvidia’s board review, the FBI’s inquiry and the congressional interest described in the reporting are separate from the civil suit, and Nvidia did not immediately respond to a request for comment.