Huang Out: Nvidia Spy Row Threatens Japan's Chip Economy

Jensen Huang has resigned as chief executive, president, and director of Nvidia effective immediately. Huang co-founded the company 33 years ago. The resignation follows reports of extramarital affairs, including a relationship with Alice Huang, a Megaspeed International executive and citizen of China whom U.S. intelligence suspects of working for the Chinese government. Additional reporting described a separate relationship with Kimberly Powell, a Nvidia vice president of health care, and a third alleged affair with another unnamed Nvidia employee. Huang admitted being unfaithful to his wife, Lori, and apologized, while denying that he knew of the suspicions about Alice Huang. Beijing has denied the spying allegations, calling them unsubstantiated and a smear campaign. Huang owns more than 870 million shares, about 3.6 percent of the company, and was worth $145 billion, making him the world's 13th richest person. Nvidia designs advanced chips used to train artificial intelligence models and to power companies such as OpenAI and Anthropic.

Colette Kress, Nvidia's chief financial officer and executive vice president, will serve as interim chief executive while the board searches for a permanent replacement, considering both internal and external candidates. The board named Harvey C. Jones as the company's first-ever chairman. Nvidia hired the law firm Wachtell Lipton Rosen and Katz to conduct an independent investigation into Huang's relationship with Alice Huang and related intelligence allegations. The FBI is also looking into Huang's relationship with Alice Huang, though the status of that probe is unclear. Nvidia said it has no reason to believe national security or company secrets were compromised. Rosen Law Firm filed a proposed class action lawsuit on behalf of investors who lost money as Nvidia's stock declined.

Nvidia's stock fell as much as 13 percent when trading opened and closed down 4.3 percent. The company's market value fell by $490 billion for the week. Other figures cited a one-day loss of more than $180 billion and a decline of $2 trillion. Valuation figures included approximately 5.8 trillion dollars, or more than 900 trillion yen; $4 trillion; and $4.498 trillion falling to $4.005 trillion after reaching as high as $5.75 trillion, a drop of roughly $1.75 trillion. The stock is currently trading about $160.

Huang agreed to testify before the U.S. Congress. Senate Banking Committee Chairman Tim Scott called for Huang and Commerce Secretary Howard Lutnick to testify publicly. House Foreign Affairs Committee Chair Brian Mast said Huang is open to testifying soon and that the testimony would likely be under oath, transcribed, and on video. Democratic leaders, including Senate Minority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries, called for answers about national security risks and requested classified briefings. The Senate Finance Committee and House Ways and Means Committee launched an investigation into the approval of Nvidia chip exports to Chinese government-linked companies. The Justice Department is investigating Nvidia for possible antitrust violations. Separate probes involve Megaspeed and Super Micro Computer, which makes servers using Nvidia processors. Authorities are examining whether organizations linked to Alice Huang were involved in smuggling Super Micro products.

Singaporean authorities questioned Alice Huang and confiscated her passport as part of an investigation into Megaspeed, a Singapore-based company that partners with Nvidia and was accused of illicitly shipping advanced Nvidia computer chips into China. Authorities found insufficient evidence that she committed a crime but suspected she provided inaccurate information about her role and barred her from returning to the country. Megaspeed built data centers in Southeast Asia later used by Alibaba, raising questions about whether U.S. export restrictions on advanced artificial intelligence chips were avoided.

Possible successors mentioned include Apple CEO Tim Cook, suggested by President Donald Trump on social media; Arm Holdings CEO Rene Haas; AMD CEO Lisa Su; and internal candidates Colette Kress and Nvidia vice president Ian Buck, who manages Nvidia's artificial intelligence hardware and software and has worked at Nvidia for 22 years. Prediction markets put the odds of Buck becoming the next chief executive at roughly 40 percent. Trump also praised Huang's work and previously urged him to fight to keep his job. Nvidia's planned developer conference in Washington, D.C., with Huang hosting a keynote, is now uncertain.

Other chip stocks moved following the news. Advanced Micro Devices shares rose nearly 17 percent. Broadcom jumped more than 5 percent. Qualcomm rose about 1 percent. Intel, Marvell Technology, and Micron Technology fell more than 2 percent each. The iShares Semiconductor ETF dropped about 1 percent.

Retail traders bought a net $111 million of Nvidia shares in the first 30 minutes of trading on the day of the resignation, the stock's biggest opening on record. Nvidia absorbed 61 percent of all retail buying in U.S. stocks and exchange-traded funds during the period. Analysts have slashed price targets, with at least 10 Wall Street analysts turning more bearish. Stifel lowered its target to $205 from $315 but kept its buy rating. Baird cut its target price from $500 to $200 and downgraded the stock to neutral. Cantor Fitzgerald cut its target from $350 to $250 while maintaining an overweight rating. Bernstein lowered its price target from $400 to $200 and changed its rating to Market-Perform. KeyBanc Capital Markets called Kress's appointment constructive given her long tenure as chief financial officer and deep knowledge of Nvidia's business.

Nvidia plans to announce fiscal third-quarter results and host an earnings call, with Kress expected to speak. Wall Street will watch for comments about China. Nvidia has agreed to purchase $10 billion worth of Anthropic Class N common stock immediately following Anthropic's initial public offering. The company has invested billions in Anthropic and also announced equity investments in OpenAI and SpaceX's xAI. Nvidia invested $5 billion in Intel and roughly $2 billion each in Nebius, Marvell, Lumentum, Coherent, and CoreWeave. Nvidia had $36 billion in off-balance-sheet backstops for neoclouds, $20 billion dedicated to leases, and obligations to other firms estimated at $400 billion.

The resignation occurs amid negotiations between the United States and China over semiconductor exports and rare earth supplies. Washington has limited exports of advanced artificial intelligence chips to China. The American president had reportedly considered easing some restrictions in return for greater Chinese cooperation on rare earth exports. Tetsuo Kotani, a professor of American politics and international security, warned that the controversy could weaken Washington's position in negotiations with Beijing. Japan is working to strengthen its own semiconductor industry and expand investment in artificial intelligence, and Japanese manufacturers and technology companies depend on the global supply chain for advanced chips.

Original Sources: newsonjapan.com, theguardian.com, bbc.com, ft.com, nytimes.com, cnbc.com, pbs.org, finance.yahoo.com

Category: Economics

Keywords: alibaba, alice, beijing, china, chips, colette, huang, japan, jensen, kress, nvidia, semiconductors, tokyo, washington, yen

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