Nvidia faces deepening scrutiny over China chip ties, CEO affair

Nvidia's market value plummeted by approximately US$430 billion over two reporting periods as fresh reports cast doubt on CEO Jensen Huang's relationship with a Chinese businesswoman suspected of espionage for Beijing. The controversy intensified on multiple fronts on Tuesday, with allegations surfacing that Huang's connection to Alice Huang facilitated up to US$7.5 billion in Nvidia chip deliveries to China.

Additionally, US Secretary of State Marco Rubio reportedly briefed President Donald Trump on the matter while aboard Air Force One to China in May, as per The New York Times. Senate Democratic Leader Chuck Schumer demanded answers from the administration and stricter restrictions on chip exports to China, while Nvidia's independent directors engaged outside counsel to investigate.

Huang's personal conduct has evolved into a broader risk for the company, prompting questions about Nvidia's governance and its reliance on the long-standing CEO who has overseen its transformation into the leading provider of AI chips. The FBI is independently probing whether 63-year-old Huang may have been targeted by a foreign intelligence operation.

Huang acknowledged being unfaithful to his wife but offered no further details on the relationship. China's foreign ministry dismissed the espionage accusations as "groundless." Huang apologized to senior executives via a closed-door meeting before resuming Nvidia's business operations. The company's board maintains no evidence of US national security or confidential information being jeopardized and that Huang is committed to cooperating with the internal review.

The board has retained Joon Kim, a partner at Wachtell Lipton and former acting US Attorney for the Southern District of New York, to oversee the probe. Nvidia's shares, which had remained relatively stable this year before the affair's revelation, have declined by 9.5% since the news broke. The stock has trailed the broader market due to investor apprehension about whether significant investments in AI will yield sufficient returns.

It emerged that Rubio had informed Trump aboard Air Force One en route to China in May about US intelligence suggesting Huang was linked to a woman believed to be a Chinese spy. Trump stated on Monday that he had spoken with Huang and asked if he knew the woman was a spy. Trump claimed Huang assured him he had "absolutely no idea" and that he believed the CEO.

Trump also asserted he was unaware of the alleged ties when Huang accompanied him to China in May. A White House official disputed the report, directing Reuters to Trump's comments on Monday. Schumer criticized the administration, stating that the President is supposed to protect America, not China, or his friends. He urged lawmakers to swiftly approve new limitations on US chip exports to China.

Axios cited sources reporting that Commerce Secretary Howard Lutnick was given a classified memo concerning Huang's relationship with Alice Huang. Reuters could not independently validate that account. The Commerce Department and Nvidia declined to provide additional information outside regular business hours. Alice Huang, also known as Huang Le, alongside her husband and sister, established a network of companies across China and Singapore to procure Nvidia chips.

When US export restrictions hindered orders for Nvidia chips, Alice Huang leveraged her connections with Nvidia to secure supplies, enabling the transportation of approximately 240,000 H100, H200, and some A100 chips to China. Some of these chips eventually reached Alibaba, Tencent, and various smaller Chinese AI laboratories. Reuters could not ascertain Alice Huang's current location to request comment.

She had previously held senior positions at a Shanghai investment firm before becoming the controlling shareholder of Singapore-based cloud-computing firm Megaspeed International, which held a preferred status with Nvidia in 2023, granting it priority access to Nvidia's chips. Separately, The Financial Times reported that several US government agencies advocated for Megaspeed to be added to the entity list, a trade blacklist comprising entities connected to China that pose significant national security risks.

However, the Commerce Department postponed efforts to blacklist the company, citing a need for additional information. The Commerce Department and Nvidia did not respond to Reuters' requests for comment. Alibaba, Tencent, Megaspeed, and Century Litong were not immediately available for comment.