Nvidia shares fall as FBI investigates CEO's ties to China
Nvidia stock has dropped significantly, with weekly declines reported between 10% and 18%, as an FBI investigation probes CEO Jensen Huang's relationship with a suspected spy. The turmoil has reduced Nvidia's market cap to around $4 trillion, raising key-person risk concerns in the AI sector.
Nvidia shares have suffered a sharp decline following revelations regarding CEO Jensen Huang's extramarital affair with Alice Wang, who is alleged to have facilitated the export of billions of dollars worth of Nvidia chips to China in violation of US sanctions. Reports indicate that Wang, CEO of Singapore-based Megaspeed, may have been a Chinese spy, and that $7.5 billion in chip flows passed through Chinese firms. The stock fell approximately 6% to its lowest level since late March, marking an 18% weekly decline and reducing the company's market capitalization from nearly $5 trillion to around $4 trillion. Some reports cite a 10% drop, while others note a 5% decline erasing $200 billion in value, reflecting the volatility in pricing during the period.
The scandal has intensified political pressure on US President Donald Trump, with opposition members arguing he prioritizes friends over national security. Investigations are underway by Nvidia, the FBI, and US intelligence agencies. The incident has raised significant key-person risk concerns, as Huang is viewed as the strategic operating system of Nvidia, with approximately 60 direct reports, ten times the typical corporate norm. Despite the turmoil, US financial markets and analysts expect Huang to retain his position, as no clear successor exists for his role in the AI boom. The broader tech market has shown resilience, with the S&P 500 gaining in some sessions, while Nvidia's valuation remains depressed relative to growth expectations, trading at a 15x forward P/E. Secondary beneficiaries like Caterpillar have also seen stock declines, reflecting a distrust premium in the sector.