Nvidia and CEO Jensen Huang Face Shareholder Lawsuit Over Affair
Nvidia and its CEO, Jensen Huang, are facing a shareholder lawsuit that accuses them of misleading investors about Huang's affair with a woman U.S. intelligence reportedly suspects of gathering information for China. The class-action complaint was filed Monday in federal court in California, just days after Huang admitted to the relationship and apologized.
The suit comes as the world's second-most valuable company deals with a board inquiry, a sharp drop in its stock price and questions from Washington.
What the Lawsuit Claims
The lead plaintiff, retail investor Mark Kistenmacher, is seeking to represent anyone who bought Nvidia shares between Oct. 9 and Nov. 8, according to the Associated Press. The suit was filed by the Rosen Law Firm in federal court in San Jose.
The complaint alleges that Nvidia and Huang failed to disclose the affair and made false statements about the company's relationship with the woman's former employer. It argues the situation posed "a material risk to the Company's reputation and business prospects."
According to the filing, investors would not have bought shares "at the artificially inflated prices that they did, or at all" had they known. The lawsuit seeks unspecified damages and a jury trial.
The Affair at the Center of the Case
The New York Times first reported on Oct. 9 that Huang had a close relationship with Alice Huang, a former executive at Singapore-based Megaspeed International. The two are not related, as Huang is a common Chinese surname.
According to the Times, U.S. intelligence determined that Alice Huang was gathering information for Beijing. The lawsuit also says she is "suspected of seeking to help smuggle Nvidia products into China." Beijing has denied that Huang was the target of a foreign intelligence effort.
Megaspeed bought more than $4.8 billion in Nvidia chips over the past two years, the Times reported. Two law enforcement sources told CBS News that the Justice Department's National Security Division is investigating Megaspeed for possible violations of U.S. export restrictions on advanced AI chips.
The case has raised concerns that China could be using improper means to get its hands on Nvidia's most advanced technology, which faces strict export limits. Earlier this year, the U.S. confirmed that Nvidia had started shipping AI chips to China.
Huang Apologizes as Nvidia Investigates
In a message to employees released Sunday, Huang admitted he had been "unfaithful" to his wife. "There is no excuse for what I did. I am deeply sorry," he wrote.
Huang also apologized to his family and the company in an open letter on Nvidia's website, saying he would "support the investigation and will cooperate fully," KIRO 7 reported.
On Nov. 8, Nvidia said it was looking into reports that Huang was the "target of a foreign intelligence effort." The company has said its compliance team previously reviewed Megaspeed and determined it was not doing anything illegal. Nvidia did not immediately respond to requests for comment on the lawsuit.
Stock Drop and Reaction in Washington
Nvidia shares fell $7.97, or 4.3%, on Monday, wiping out roughly $190 billion in market value. Shares slipped again before the opening bell Tuesday. According to Newsweek, the stock has fallen about 14% over the past several days, though the company was still valued at more than $4.3 trillion.
President Donald Trump said Monday that the FBI is "looking into" the matter. He said he had spoken with Huang, who told him he had no idea the woman could be involved in espionage, and added that Huang will "be in good shape."
Some Democrats in Congress, including Sen. Mark Warner and Rep. Hakeem Jeffries, have said they are interested in investigating further.
None of the allegations in the shareholder lawsuit have been proven in court.
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