Nvidia shares fall 5% after CEO spy investigation begins

Nvidia shares dropped 5% in premarket trading on Monday, November 9, after the company confirmed an investigation into its chief executive. The chipmaker announced on Sunday that it is looking into reports that CEO Jensen Huang was the target of a foreign intelligence effort. This move followed Huang's public acknowledgment that he had been intimate with a business executive. According to The New York Times, U.S. intelligence determined that this executive was gathering information for China.

China’s Foreign Ministry responded to the news during a routine briefing on Monday. The ministry dismissed the spying allegations, labeling them a smear campaign against Beijing. Nvidia remains a central player in the development of artificial intelligence. Its chips power many of the data centers and computing systems used to train and run AI models. Advanced processors from the company have also been a focus of U.S. export restrictions aimed at limiting China’s access to cutting-edge semiconductor technology.

Dan Ives, a partner and senior managing director at Yorkville Ives & Co., assessed the potential impact on leadership. He noted in an analyst note that there is a small chance Huang is removed or steps down from the CEO post. Ives emphasized that Huang is the core DNA of Nvidia and that its AI success is heavily tied to him staying in the role. He wrote that no other person on the management team bench can step in seamlessly as CEO. This dynamic represents a key risk that investors will factor into the stock.

Ives also stated that there is a risk Huang could be removed depending on the board's findings. He said the situation will remain an overhang on shares in the near term. Nvidia’s stock had reached an all-time high of $243.37 last month. The company is now working to determine the extent of the foreign interest in its leadership.