Nvidia and chief executive Jensen Huang were sued on Monday in a proposed class action accusing them of defrauding shareholders by concealing Huang's ties with a woman suspected by U.S. intelligence of working for China.
The complaint, filed in federal court in San Jose, California, says Nvidia and Huang misled investors by describing Huang's dealings with Singapore-based Megaspeed as routine, without disclosing his alleged relationship with Alice Huang, a former Megaspeed executive who is not related to him. U.S. authorities have concluded that Alice Huang was a Chinese intelligence asset, according to reporting by The New York Times last month. U.S. officials also suspect Megaspeed of illicitly moving restricted Nvidia semiconductors into mainland China.
Nvidia shares closed down 4.3 percent on Monday, wiping about $190 billion off the company's market value. The lawsuit was filed five minutes after the market closed. Shareholders led by Mark Kistenmacher are seeking unspecified damages, and the complaint alleges the relationship raised national security concerns that threatened Nvidia's reputation and business prospects.
The suit follows Nvidia's announcement on Sunday, November 8, that its board is opening an independent investigation into reports that Huang was the target of a foreign intelligence operation. A committee of independent directors, assisted by external legal counsel, will oversee the inquiry. The board said it had no reason to believe U.S. national security or Nvidia's secrets had been compromised. Huang told Nvidia employees on Sunday that he had been unfaithful to his wife, without addressing the alleged relationship.
President Donald Trump has defended Huang, calling him an "honourable guy" on Sunday and saying on Monday that he had spoken with Huang, who told him, "I had no idea that she was a spy." "I really believe him," Trump said, according to Fox News. House committee leaders have requested a joint closed-door briefing from Huang on the allegations. China on Monday rejected the allegations as "groundless speculation."
The allegations have not been established in court, and Nvidia has not been accused of wrongdoing. It is common for shareholders to sue companies after unexpected share price declines.
