Share price tumbles as Nvidia investigates CEO and 'foreign intelligence'

Nvidia shares have plummeted following an investigation into allegations that CEO Jensen Huang was the target of a foreign intelligence effort involving a suspected Chinese spy. Mr Huang has admitted to staff that he had a romantic relationship with a business executive who US intelligence determined was gathering information for China.

The company's announcement of the investigation came after Mr Huang acknowledged his affair with the executive. Shares of Nvidia and other major AI companies have been steadily falling since early October, fueling concerns about a potential bubble in the sector.

Nvidia's chips are integral to many data centers and computing systems utilized for AI model training and operation. The company's advanced processors have also been a focal point of US export restrictions intended to curb China's access to cutting-edge semiconductor technology.

China's Foreign Ministry has dismissed the spying allegations as a smearing campaign against Beijing. While there is a slim chance Mr Huang could be removed or step down as CEO, senior analyst Dan Ives of Yorkville Ives & Co. noted that Mr Huang is not easily replaceable.

The recent midterm elections may also contribute to increased regulatory scrutiny in Washington, particularly concerning China and chip restrictions as the AI arms race between the US and China intensifies. However, Ives cautioned that there is a risk that Mr Huang could be removed as CEO depending on the board's investigation, which could continue to put downward pressure on Nvidia's shares in the near term.

Nvidia and other major AI companies have been experiencing steady declines in share prices since early October, driven by fears of a bubble in the sector. Nvidia's stock has plummeted 23% over the past 30 days, including a significant sell-off on Monday. The company's stock recently slipped $US10.48 to $US176.16, marking an all-time high last month.