Nvidia shares set to slide as spy scandal threatens AI recovery

Nvidia shares are expected to plummet on Monday's opening of Wall Street following a spying scandal that could undermine the semiconductor company's recovery from a recent market downturn. The AI leader's stock was trading at €157.84 (£131.67) on Germany's Tradegate exchange on Monday morning, slipping by 5.8 percent as investors reacted to the company's announcement of an independent probe into allegations that its CEO, Jensen Huang, was targeted by Chinese intelligence.

The setback follows a turbulent week for technology stocks, which saw a $2.5 trillion decline in the Nasdaq on Thursday due to growing doubts about the sustainability of the AI investment boom. Nvidia experienced a partial rebound on Friday, with shares jumping over seven percent in early trading, but still lagged around 22 percent below its October high.

The latest controversy threatens to erase those gains just nine days before the company reports its quarterly earnings. Jensen Huang, who is expected to face a spy investigation, admitted over the weekend that he had been unfaithful to his wife after reports surfaced that he had been involved with Alice Huang, a former executive from Singapore's Megaspeed International.

US authorities reportedly identified Alice Huang as a Chinese intelligence asset, but the allegations have not been proven against Jensen Huang. Huang expressed regret, acknowledging that his actions hurt his family and children, and apologized. Nvidia's board has appointed independent directors and outside lawyers to investigate the reports, though the company stated there is "no reason to believe" that national security or confidential company information was compromised.

Chinese state media denied involvement, accusing American media outlets of promoting an unfounded espionage narrative. Market analysts have warned that any doubt over Huang's position could create further uncertainty for shareholders until the investigation concludes. The scandal has also sparked renewed doubts about Nvidia's relationship with China, where US export controls have aimed to limit access to advanced American chips.

Huang has previously criticized those restrictions, arguing that they have spurred Chinese companies to develop alternative technologies.