Nvidia’s Board Orders an Inquiry After Reports on Huang

SANTA CLARA, Calif., Nov. 8 — Nvidia’sNvidia’s board of directors said on Sunday afternoon that it was initiating an independent investigation “in light of recent reporting that founder and CEO Jensen Huang has been the target of a foreign intelligence effort.” A committee of independent directors, assisted by outside independent counsel, will oversee it.

About an hour later Nvidia published an email from Mr. Huang to its employees in which he wrote, “I was unfaithful to my wife.” “My actions hurt her and our children. There is no excuse for what I did. I am deeply sorry,” he wrote. The email names no one.

For the company Reuters calls the world’s most valuable chipmaker, the reports are now a question for its own board, eight days before it reports its fiscal third-quarter results on Nov. 17. “The key question investors will be asking is: Will Jensen remain CEO of Nvidia?” Dan Ives of Yorkville Ives wrote in a note to investors on Sunday, as quoted by Yahoo Finance. His own answer: “we would expect Jensen to continue in his role as CEO with no interruption in the near-term.”

The board’s statement makes no accusation against Mr. Huang. The board said it “has no reason to believe that either national security or NVIDIA secrets were compromised,” but that its inquiry “will examine all available information.” It said it “has confidence in Jensen and his leadership team.” It did not name the directors on the committee or the law firm. By 5:16 a.m. Eastern on Monday, Nvidia had filed no Form 8-K concerning the investigation with the Securities and Exchange Commission; its latest filing was a Form 4 on Nov. 6.Form 8-KThe “current report” companies must file with the SEC “to announce major events that shareholders should know about,” according to the SEC’s Investor.gov. Companies generally have four business days to file one after an event that triggers the filing requirement.

In his email Mr. Huang gave the reports one paragraph. “Regarding the national security concerns raised in news reports, NVIDIA’s Board of Directors has initiated an independent investigation. I support the investigation and will cooperate fully,” he wrote.

I support the investigation and will cooperate fully.

An Nvidia spokesperson told CNBC that Mr. Huang was committed to continuing as chief executive without interruption.

The Reports

On Oct. 29 The New York Times reported that U.S. intelligence agencies had concluded that Alice Huang, also known as Huang Le, was a Chinese intelligence asset, and that surveillance of her had revealed a close relationship with Mr. Huang, according to Decrypt’s account of the report. She is a former executive of Megaspeed, a Singapore-based company, and is not related to him, Reuters reported.MegaspeedAn Nvidia customer. U.S. officials suspected it of helping Chinese companies get around restrictions on advanced AI chips, the Times reported, by Decrypt’s account.

On Saturday the Financial Times reported that a U.S. government memo, written earlier this year on the basis of intelligence, said Mr. Huang had been romantically involved with her, citing people familiar with the memo, according to Decrypt. Nvidia declined to comment to the FT on the memo, Decrypt reported. The Times has reported that Mr. Huang has acknowledged to Nvidia’s board that he had been intimate with a business executive who U.S. intelligence determined was gathering information for Beijing, The Associated Press reported.

“Our relationship, our interactions, have been related to Megaspeed, and it was all completely normal and not unusual,” Mr. Huang told Bloomberg News on Oct. 29, as quoted by Taiwan News; he also said the government had not told him of its suspicions. He said Nvidia had reviewed Megaspeed’s operations and found no evidence that its AI chips had been illegally shipped to China, Taiwan News reported. Nvidia told the Times that his interactions with Alice Huang were “not unusual or unexpected,” Decrypt reported. Megaspeed told the Times it had retained outside counsel for an internal investigation; Alice Huang did not respond to the newspaper, Decrypt reported.

Three House chairmen asked Mr. Huang last week to brief them behind closed doors about his interactions with her.

The Reaction

China’s foreign ministry dismissed the reports on Monday. “The so-called Chinese spy allegation is unsubstantiated. It is nothing but smears against China,” Guo Jiakun, a ministry spokesperson, said, as quoted by The Associated Press.

President Trump said on Sunday that he had not spoken to Mr. Huang about the allegations, Reuters reported. Mr. Trump was briefed on the intelligence findings roughly a year ago and chose not to do anything with the information, the Times has reported, according to Reuters. Asked whether he should have acted on the intelligence when he was briefed, he said, as Reuters reported it: “No, I don’t think so. I think he’s an honorable guy. I think he probably has an excuse for it. You have to hear it.”

In Seoul, where Nvidia scheduled a two-day AI Day for Monday and Tuesday and announced a plan to connect a Korean chip to its racks, South Korea’s deputy science minister said the government expected no disruptions to contracted deliveries of Nvidia GPUs, Reuters reported.

The Money

At 5:15 a.m. Eastern on Monday, before the market opened, Nvidia’s shares were at $178.54 by Yahoo Finance’s data, down 4.34 percent from Friday’s close of $186.64.NVDANasdaq178.67▼7.97−4.3%Nvidia · Monday’s session They had already lost 8.80 percent last week.Last WeekNvidia closed at $204.64 on Oct. 30 and at $186.64 on Nov. 6. Over the same week the PHLX Semiconductor index fell 12.15 percent.

Chris Weston, head of research at Pepperstone in Melbourne, did not expect Mr. Huang to be replaced. “If we genuinely thought he was going to step down … the stock would be down — it would be an absolute bloodbath, to be honest,” he said, as quoted by Reuters.

Mr. Ives also wrote: “There is clearly risk that Jensen could be removed as CEO depending on the Board investigation, and this will add risk to the stock as he is so important to the Nvidia story and strategy globally.”

Nvidia’s Asian suppliers rose anyway on Monday: TSMC closed 4.68 percent higher in Taipei, and Samsung Electronics and SK hynix edged up 0.64 and 0.35 percent in Seoul.

The calendar is close. The House chairmen asked Mr. Huang to accept their invitation, or offer another date, by Wednesday, Nov. 11. Nvidia reports its results on Nov. 17, with a call at 5 p.m. Eastern; the chairmen asked for their briefing the next day. The board has promised “further updates as appropriate”; the first thing to look for is whether they name the committee’s members and its counsel.