Nvidia and its Chief Executive Jensen Huang were sued in California federal court on Monday in a proposed class-action lawsuit accusing them of defrauding shareholders by hiding Huang's personal ties to a suspected Chinese intelligence asset.
The market erased $190 billion in hours.
According to the complaint filed in the U.S. District Court in San Jose, the Santa Clara-based semiconductor titan misled the market by concealing Huang's alleged affair with Alice Huang, a former executive of Singapore-based Megaspeed who is unrelated to him. The filing contends that executive leadership failed to disclose that the relationship created severe national security concerns—exposing Nvidia's global reputation and core commercial prospects to sudden regulatory peril.
The backlash hit Wall Street immediately. Nvidia shares slumped 4.3% during Monday's trading session, wiping out approximately $190 billion of the chipmaker's market capitalization. The lawsuit landed on the federal docket five minutes after the closing bell.
U.S. authorities concluded that Alice Huang was an intelligence asset operating on behalf of Beijing. While Jensen Huang admitted infidelity to Nvidia staff—telling employees he had been unfaithful to his wife—he did not disclose the intelligence dimensions of the relationship or the identity of his partner. Nvidia's board launched an internal probe on Sunday, but the company did not issue an immediate statement following the lawsuit.
Lead plaintiff Mark Kistenmacher is seeking unspecified damages on behalf of investors who purchased Nvidia shares before the national security exposures surfaced. Federal proceedings in San Jose will now determine whether the chipmaker and its chief executive face full discovery hearings on the fraud allegations.