Nvidia and its chief executive, Jensen Huang, have been accused of defrauding shareholders in a lawsuit over the Chinese spying scandal engulfing the $4.3tn (£3.2tn) company. The legal action came as Donald Trump said the FBI was investigating Huang’s affair with an alleged Chinese spy.
Lawsuit alleges failure to disclose national security risks
According to a complaint filed in federal court in San Jose, California, Nvidia and Huang misled shareholders in connection with the executive’s alleged affair with Alice Huang, a former executive of Singapore-based Megaspeed who is not related to him. The shareholders claim both parties did not disclose that the matter raised national security concerns that threatened Nvidia’s reputation and business prospects.
The New York Times reported on the alleged relationship last month, and said US authorities had concluded Alice Huang was a Chinese intelligence asset. Nvidia did not immediately respond to a request for comment to Reuters.
Huang acknowledged affair to employees
Jensen Huang told Nvidia’s employees he had been unfaithful to his wife, without disclosing details of the alleged relationship. He co-founded Nvidia in 1993 and has led the California company as it became the world’s most valuable chipmaker and made him one of the world’s most prominent symbols of the artificial intelligence boom.
Nvidia announced on Sunday it was conducting an independent investigation into reports that Huang was the “target of a foreign intelligence effort”. Shares in the company tumbled on Monday, closing down 4.3%, reducing Nvidia’s market value by approximately $190bn. The lawsuit was filed five minutes after the US stock market closed.
Shareholders seek damages
It is common for shareholders to sue companies after unexpected share price declines. Nvidia shareholders, led by Mark Kistenmacher, a retail investor, are seeking unspecified damages from the defendants.
Trump said on Monday that the FBI is investigating Huang’s affair but said he does not think the executive has a reason to worry. “I know the FBI is looking into it in terms of something else, and I think that he’ll be in good shape,” Trump said at a White House briefing. “I did speak to him today just to see if he’s feeling all right, how you’re doing,” Trump said. “He said he had absolutely no idea that the person in question was a spy.”
Huang said in an open letter posted on Nvidia’s website: “I support the investigation and will cooperate fully. I love our country and our company. I am committed to protecting Nvidia and supporting America’s national security.”
