As Nvidia's stock falls, here's what Wall Street has to say about the Jensen Huang scandal

By Steve Goldstein and Britney Nguyen

The fallout from the board's new investigation could become 'a longer-lasting problem for the company,' analysts say

Nvidia's board is probing CEO Jensen Huang's relationship with a Chinese executive.

Nvidia's stock is falling Monday as Wall Street assesses the fallout of a board investigation into whether CEO Jensen Huang gave away secrets while having an affair with someone the U.S. government reportedly believes to be a foreign-intelligence asset.

While the outcome of Nvidia's probe into Huang is still up in the air, Seaport Research analyst Jay Goldberg, who has largely been alone in taking a bearish view of the company, said in a note that he expects the investigation to "become a longer-lasting problem for the company."

The allegations will likely be a distraction for the chip maker's management for weeks and shift focus from running the company, he said in a note to clients.

An Nvidia spokesperson, however, said the development "will not slow" the company. Jensen is committed to continuing to lead Nvidia as CEO without interruption."

Nvidia shares are down 5.6% in premarket action on Monday, and analysts expect the latest developments to cloud over the stock for some time. The news raises various issues, according to analysts, such as whether Huang can keep the CEO role and whether Nvidia's sales will be subject to greater government scrutiny.

Goldberg said Nvidia's ability to do business in China will likely remain an issue. After going back and forth with the Trump administration on selling its chips to Chinese firms, Nvidia now has to get approval from the U.S. government on a customer-by-customer basis. Goldberg said he doesn't see more approvals "any time soon."

Additionally, Huang's relationship was reported to be with an executive from Singapore-based Megaspeed, which provides computing power to companies in Southeast Asia. The news will likely put Nvidia's sales to that region under "fresh, intense scrutiny," Goldberg said.

Goldberg sees a "compounding problem" for Nvidia if its sales to China become more limited, as restrictions could dent the success of the company's CUDA software ecosystem and push Chinese AI researchers toward homegrown alternatives.

While Bernstein analyst Stacy Rasgon isn't sold on the idea that Huang was persuaded by an intelligence asset to lobby in favor of China, he said the coverage will be "a heavy distraction" at best, or give both Democrats and Republicans "significant ammunition" for tighter regulations on the data-center buildout, Rasgon said.

If Huang were removed from his position at Nvidia, China would benefit, Rasgon said. Still, the allegations against Huang are "negative" for the company, he said, and at the least, "the overhang is going to be around for a while."

Gary Black, founder of The Future Fund, said there's more than just a small risk that Huang will exit. "I doubt Jensen Huang will be able to remain" Nvidia's CEO, he said in a post on X. "While I don't see long-term value impairment, many portfolio managers will reduce their [Nvidia] holdings in the coming weeks as a result of uncertainty over who could succeed Jensen."

Citi analysts led by Atif Malik said the key issues are likely potential governance implications, increased regulatory scrutiny and export-control compliance of the flow of H200 chips into China, and the long-term impact on leadership stability.

-Steve Goldstein -Britney Nguyen

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11-09-26 0909ET