Nvidia’s $668 billion rout deepens as Huang crisis escalates

Reports that Nvidia chief executive Jensen Huang knew alleged Chinese spy Alice Huang as far back as 2023 sent the chipmaker’s stock into a fresh tailspin on Tuesday.

Nvidia shares plunged 6 per cent to $US167.87 in the afternoon in New York to take its market wipeout to $US461 billion ($668 billion) of losses across two sessions of frenzied selling since Huang confessed to the secret romance by email on Sunday.

The stock has now plunged 10 per cent this week, with Tuesday’s renewed selling helping push all three major Wall Street indices lower.

Sell or buy?

The uncertainty around the allegations against Huang has flummoxed professional investors left scrambling to assess the unknown impact on a business that has been the golden child of the AI boom.

“Whether his affair with an apparent Chinese spy has any ongoing implications or impact on Nvidia’s valuation will depend on what is uncovered as part of the independent investigation,” said ECP Asset Management Portfolio Manager Annabelle Miller.

“Given Nvidia’s current valuation, it is optically cheap. However, the distribution of potential outcomes is wide which equity markets struggle to price cleanly.”

An inquest into the allegations by the Nvidia board and Federal Bureau of Investigation (FBI) inquiry are leading many to bet Huang won’t survive the scandal.

Miller said investors were also concerned about the lack of a clear successor to Huang if he were forced to step down from the $US4 trillion chipmaker.

“Jensen Huang is to Nvidia as Steve Jobs was to Apple,” she said. “If Huang were to resign or be forced to leave Nvidia then this would weigh on the valuation of the business in the short-term.”

Huang is under pressure amid allegations his lover’s Singapore-based company, Megaspeed, secured around $US7 billion of Nvidia chips, many of which were allegedly channelled into China despite an export ban.

“At worst, there is a significant reset to the earnings base, possible regulatory action and a higher cost of capital [for Nvidia],” Miller said. “At best, there’s no impact and Nvidia enjoys a modest re-rating as fundamentals reassert.”

Miller added that a leadership change could prove to be a short-term setback if Nvidia found a successor capable of allocating capital effectively and sustaining the company’s growth.

“If we look at Apple as a precedent, Steve Jobs like Huang was a visionary, but the business continued to thrive with the market cap rising from $US350bn to $US 5trillion, up 14-fold, since Jobs’ passing,” she said.

Huang retains around a 3 per cent shareholding in Nvidia, although none of the 60 employees that report into him have been regularly identified as a potential successor to one of the most important roles in the AI industry.

Others have sought to defend Huang and said he should continue as CEO.

They include US President Donald Trump, who said early on Wednesday that the pair may even visit Asia together next week.

Wall Street wobbles, Australian dollar falls

Soaring borrowing costs also weighed on other AI businesses linked to Nvidia on Tuesday, after US inflation data for October came in hotter-than-expected.

The data pushed the US 10-year bond yield 15 basis points higher, back above 5 per cent, as traders ramped up bets that the Federal Reserve would lift interest rates on December 9.

So-called ‘neocloud’ businesses that are reliant on huge amounts of debt funding and Nvidia chips to service their business models plunged on the Nasdaq Index in response.

Late on Tuesday’s session on Wall Street, Australian-founded neocloud IREN had tumbled 7.6 per cent to $US19.78 a share. While larger peer Nebius retreated 4.7 per cent to $US134.85.

The sell-off also weighed on the Australian dollar, which fell 1 per cent against its US counterpart to buy US68.5 cents on Wednesday morning.