Nvidia lost around $250 billion in market value after its shares fell 4% on Monday following reports that chief executive Jensen Huang had been targeted in an alleged Chinese espionage operation.
The US chipmaker's board has launched an independent investigation into reports that Huang had a close relationship with Alice Huang, also known as Huang Le, who US intelligence officials suspect of working for Beijing.
According to the BBC, US Secretary of State Marco Rubio had warned senior officials last spring about the alleged relationship. Alice Huang was reportedly managing director of Singapore-based Megaspeed, a company that had business dealings with Nvidia.
Nvidia said it had no reason to believe its trade secrets or US national security had been compromised. However, the board said the investigation would examine reports of a foreign intelligence effort targeting its chief executive.
Huang admitted to being unfaithful to his wife and apologised to his family. He also pledged to cooperate with the investigation and said he remained committed to protecting Nvidia and US national security.
China has rejected the allegations, calling claims about Chinese spies baseless and politically motivated.
The controversy has also drawn congressional attention. US lawmakers have requested a closed-door briefing with Huang next week to question him about his alleged links to Alice Huang and the company's safeguards against industrial espionage.
US President Donald Trump described Huang as an honourable person, while other technology leaders, including Elon Musk, expressed support for him remaining at the helm of Nvidia.
Despite Monday's sell-off, analysts expect the impact on Nvidia to be limited. The company remains central to the global artificial intelligence industry, supplying advanced chips used to develop and operate AI systems.
However, questions over Huang's leadership could create uncertainty for investors. Analysts have also pointed to the lack of an obvious successor should he leave the company.
The controversy comes as Nvidia remains at the centre of the technology rivalry between Washington and Beijing. Huang has previously opposed strict restrictions on chip exports to China, arguing that limiting access to US technology could weaken America's position in the global AI race.
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