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Nvidia Scandal: Nvidia, once a favourite among investors riding the artificial intelligence (AI) boom, is facing mounting scrutiny after shareholders filed a class-action lawsuit against CEO Jensen Huang and the company over his affair with Alice Huang, suspected of having links to Chinese intelligence.
The lawsuit has brought the chipmaker's leadership, corporate governance and potential national security exposure under the spotlight. The controversy also involves Singapore-based Megaspeed, the woman's former employer, which has faced scrutiny over suspected links to the movement of advanced Nvidia chips into China. Huang has acknowledged the affair and apologised.
The controversy has already taken a toll on Nvidia's market valuation. Its shares declined 4.27% on the New York Stock Exchange on Monday, wiping out $192.1 billion in market capitalisation in a single session. The AI stock extended its losses on Tuesday, down another 5.5% to $168.89 per share. Nvidia's market cap dropped to $4.08 trillion, wiping out over $420 billion in just two sessions.
The shareholder lawsuit has added to investor concerns, with plaintiffs arguing that the revelations and potential national security implications were responsible for the losses.
A group of shareholders filed the lawsuit in the US District Court for the Northern District of California on Monday, accusing Huang and Nvidia of violating federal securities laws. They are seeking compensation for losses suffered after the revelations triggered a sell-off in the company's shares.
The plaintiffs argue that investor losses followed disclosures about Huang's relationship with Alice Huang and the potential national security risks associated with her former employer.
According to the Financial Times, Alice Huang and Chinese business partner Kang Wei approached investors in early 2025 to raise hundreds of millions of dollars for a data centre project in Southeast Asia. During the pitch, she reportedly claimed that securing Nvidia's advanced graphics processing units (GPUs) would not be difficult, despite US export restrictions on Chinese ownership of data centre assets containing such chips. Kang was also reportedly a director of Guilin Bank, a state-linked regional lender in China's Guangxi Zhuang Autonomous Region.
Alice Huang reportedly identified Alibaba as a prospective customer. The Chinese e-commerce company had extended financing through its Singapore subsidiary to Megaspeed's Malaysian subsidiary in 2024, after which Megaspeed's assets expanded from $33 million to $3 billion during the year.
Megaspeed, formerly 7Road International, was the Singapore subsidiary of Chinese gaming company 7Road Holdings, which had links to state-backed investors. Spun off and renamed in 2023, it subsequently developed data centres across Southeast Asia for Chinese clients, including Alibaba, purchasing large volumes of Nvidia GPUs.
US authorities suspected Megaspeed of acting as a possible channel for moving advanced American chips into China. The Commerce Department began investigating Megaspeed and Alice Huang in 2024 after the company started shipping billions of dollars' worth of advanced Nvidia AI equipment into Malaysia. However, The New York Times reported that the investigation was halted and transferred to the Justice Department after Nvidia executive vice president and general counsel Tim Teter emailed the Commerce Department in August 2025.
Alice Huang's background has also come under scrutiny. A profile on a Chinese private equity information website said she began her career as a journalist at China Central Television (CCTV) and Hunan TV before moving into finance, reportedly working at HSBC, serving as a director at Shanghai Hexi Investment and becoming a vice president at state-owned CITIC Group. None of these organisations has officially confirmed her employment history.
According to The Wall Street Journal and other media reports, she joined Megaspeed as an executive in early 2023. A Chinese national, her reported English fluency helped her build connections in the chip industry. She and Jensen Huang reportedly met at an Nvidia event in California in early 2024 and again at Computex in Taiwan later that year.
Despite the lawsuit, Huang's position at Nvidia does not appear immediately threatened. The company's board has appointed an independent committee to investigate the allegations. However, The New York Times reported that the investigation is unlikely to weaken his control significantly.
Four of Nvidia's 10 directors are longtime allies of Huang, including representatives of venture capital firms that backed the company at its founding and former executives of partner companies dating back to the 1990s.
Nvidia has also acknowledged its dependence on senior leadership. In a notice issued ahead of a shareholder meeting, the company warned that it relies heavily on its long-serving executives and does not have a succession plan in place.
Even if Huang steps down, family members already involved in the company's operations could potentially take over. These include his daughter Madison Huang, son Spencer Huang and son-in-law Nico Caprez.
Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.
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