Washington: A shareholder has sued Nvidia and its chief executive, Jensen Huang, accusing them of misleading investors over his reported affair with Alice Huang, a woman suspected by US intelligence of having links to Chinese intelligence. The controversy has raised concerns about national security, corporate governance and the chipmaker's business interests in China.
The complaint, filed by retail investor Mark Kistenmacher in a California court on Monday, alleges that Nvidia and Huang failed to disclose the relationship and issued false statements about the company's association with Alice Huang's firm, Singapore-based Megaspeed International. It claims the alleged omissions posed a material risk to Nvidia's reputation and business prospects.
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The lawsuit seeks unspecified damages and a jury trial on behalf of shareholders who bought Nvidia stock between October 9, when the New York Times first reported the affair, and November 8, when the company said it was investigating reports that Huang had been the “target of a foreign intelligence effort”.
The legal action follows President Donald Trump's statement that the FBI is investigating the affair. Huang has acknowledged the relationship and apologised for it. Trump said Huang had told him he did not know Alice Huang could be involved in espionage, while describing the Nvidia chief as an “honourable guy” who had “done an amazing job for our country”.
Nvidia did not immediately respond to a request for comment. Its shares fell $7.97, or 4.3 per cent, on Monday, wiping out about $190 billion in market value, and declined again before Tuesday's opening bell.
The controversy has also drawn attention to Huang's position at the company and the effectiveness of Nvidia's corporate governance. A report by the New York Post said governance experts and business executives familiar with the company believe the issue could develop into a wider institutional challenge, potentially putting Huang's leadership under scrutiny.
According to the report, the scrutiny could intensify when Democrats take control of Congress in January, with lawmakers potentially examining Huang's relationship with Alice Huang, Nvidia's commercial interests in China and his connections with the Trump administration.
A corporate lawyer familiar with the company's business dealings told the publication that Huang could face difficult questions in congressional hearings, particularly over the alleged relationship and its national security implications.
The New York Post also raised questions about Nvidia's board, describing it as accommodating towards Huang and questioning whether it has sufficient expertise to oversee a company with the chipmaker's technological and strategic importance. The report said Huang, 63, has not established a succession plan, despite his central role in Nvidia's identity and operations.
Alice Huang, who is not related to the Nvidia chief, is a Chinese citizen and a senior executive at Megaspeed International. The New York Times reported that US intelligence had determined she was gathering information for Beijing. The company reportedly purchased more than $4.8 billion worth of Nvidia chips over the past two years.
Questions about Huang's association with Megaspeed had reportedly emerged months before the affair became public. In May, short-selling firm Culper Research alleged that Huang had maintained an unusually close association with the company and had supported it throughout its business activities. The firm said Nvidia might have a “China problem”, citing Huang's reported closeness to Megaspeed and its executive.
Nvidia representatives had maintained that the association was entirely business-related. Photographs showing Huang and Alice Huang socialising had also begun circulating online. Around the same period, US Secretary of State Marco Rubio reportedly issued a memorandum warning that Alice Huang was suspected of being a Chinese intelligence operative.
The controversy has added to the scrutiny of Nvidia's efforts to regain access to the Chinese market. Huang has advocated greater access for China to the company's advanced AI chips, which are subject to US export restrictions. Washington subsequently reached a compromise allowing Nvidia to sell less advanced processors to Chinese customers.
The New York Post report said the combination of Huang's reported relationship with Alice Huang, Nvidia's commercial interests in China and his ties with the Trump administration could draw further attention from lawmakers. It also cited corporate governance experts who expect the company to establish a formal succession plan for its chief executive.
The shareholder complaint argues that investors suffered losses following the decline in Nvidia's share price and claims they would not have bought the stock at artificially inflated prices had they known the information in question. Nvidia's response to the lawsuit and the wider allegations had not been reported at the time of writing.
(With agency inputs from ANI and AP via PTI)
