Nvidia stock falls again in fallout from alleged CEO China spy affair

Nvidia shares sank a further 6% on Tuesday as investors continued to weigh the potential fallout from CEO Jensen Huang‘s affair with an alleged Chinese spy.

Shares closed more than 4% lower on Monday, the day after Huang told staff in an email that he had been “unfaithful” to his wife and had “fallen short” of his responsibilities as CEO.

He reportedly had an affair with Alice Huang, an executive at Megaspeed, an Nvidia customer. The New York Times on Oct. 29 reported that U.S. officials had concluded she was “a Chinese intelligence asset, funneling information to Beijing” and “possibly steering advanced Nvidia A.I. chips to China.”

U.S. President Donald Trump said Monday that the FBI is investigating.

“I’ve been reading a little bit about it over a period of time, but not too long ago,” Trump told reporters at the White House. “We’ll look into it. I know the FBI is looking into it in terms of something else, and I think that he’ll be in good shape.”

Adding to the tech giant’s woes was a class-action shareholder lawsuit filed against Nvidia and Huang in federal court in San Jose, California.

The Rosen Law Firm’s suit alleges the defendants made false or misleading statements about his affair with Huang and Nvidia’s relationship with Megaspeed, thereby presenting a material risk to the company’s reputation and business prospects.

“Right now the Street and investor chatter is assigning roughly a 15% chance he is removed as CEO of Nvidia with a high probability (85%) he stays on as CEO after the Board investigation is completed,” said Dan Ives, senior and managing director at Yorkville Ives & Co, in a Tuesday note.

“We would expect a Board investigation that could take 4 weeks to 6 weeks and will create a clear overhand on the stock until more news emerges from Nvidia.”

Amid Nvidia’s turmoil, some of its chip rivals are seeing a boost. Advanced Micro Devices and Broadcom looked to build on a strong start to the week, though shares pared gains in midday trading. AMD gained 13% on Monday, while Broadcom added just over 10%.

— CNBC’s Dan Mangan and Caleigh Keating contributed to this report.