On Monday at the market open, shares of computer chip maker Nvidia fell 5%. The cause was the announcement of an internal investigation: the company is looking into reports that its CEO, Jensen Huang, was "a target of foreign intelligence."
Nvidia announced the start of the review on Sunday. Before that, Huang acknowledged that he had been in a close relationship with the head of one company. According to The New York Times, U.S. intelligence determined that this woman was gathering information for China. China's Foreign Ministry on Monday rejected the espionage accusations, calling them a smear campaign against Beijing.
Nvidia is a key player in the artificial intelligence (AI) race. Its chips are used in data centers and computing systems on which AI models are trained and run. The company's advanced processors are also at the center of U.S. export restrictions aimed at limiting China's access to modern semiconductor technologies.
Analyst Dan Ives of Yorkville Ives & Co. writes that there is a small chance Huang could be removed from the CEO post or step down voluntarily. At the same time, Ives notes that Huang is "irreplaceable." In his view, the situation will increase pressure on the company from regulators in Washington, especially on issues related to China and chip restrictions, amid an intensifying U.S.-China AI race.
Ives also warns that, depending on the results of the board's investigation, Huang could be removed from his post, and this would weigh on the shares in the near term. On Monday, Nvidia's stock fell by $14.27 to $172.37. Last month the shares reached a record high.