Nvidia’s probe will test both its CEO and its board

NENora Ellis · Independent · Nov 11 at 6:10 AM

The Nvidia Huang probe began on November 10, when the company’s independent directors named former federal prosecutor Joon H. Kim and the law firm Wachtell, Lipton, Rosen & Katz to investigate the events surrounding CEO Jensen Huang’s relationship with a woman whom US intelligence officials believe to be a Chinese spy. The directors had announced the investigation on Sunday, after Huang acknowledged an extramarital affair. The central question is not whether the affair occurred, but whether a foreign intelligence operation targeted Huang and whether he exposed company secrets or national security interests to risk. Nvidia says it has no reason to believe either was compromised. That is a preliminary assurance, not a finding. The board’s announcement says the investigation is intended to be thorough and independent.

The distinction matters. The reports describe intelligence officials as believing the woman, identified as Alice Huang, acted for the Chinese government; they do not establish that claim as fact. Nor do they establish that Jensen Huang knew of any such activity. President Donald Trump said he believed Huang had no idea the woman was a spy. Trump also said he had not heard of the relationship before a May trip to China, though he allowed that someone might have mentioned it and said he would need to check. He expressed hope that there was no problem, while saying the government would disclose one if it found one. Trump said Monday that the FBI was also investigating.

A separate and consequential account concerns when someone may have warned the president. A report said Secretary of State Marco Rubio had twice alerted Trump to intelligence about Huang’s relationship, including during a briefing aboard Air Force One in May. NBC News has not confirmed the account, and it asked the State Department for comment. Trump’s own statements left the timing unsettled: he denied hearing about it then, but did not rule out that someone had raised it. Huang later joined the presidential trip, although reports say organizers had not included him on the initial list of business leaders invited. The competing accounts are important, but they do not answer the investigation’s central questions about what Huang knew or whether information was exposed.

The choice of Kim gives the inquiry a high-profile investigator with experience in both criminal enforcement and corporate investigations. From 2017 to 2018, he held the interim post as the US attorney for Manhattan’s federal district, after previously working as a federal prosecutor there. In 2021, he co-led an investigation into sexual-harassment allegations against then-New York Governor Andrew Cuomo; Cuomo resigned after the investigators issued their findings. Kim later handled internal corporate investigations, including work related to Nissan’s former chief executive Carlos Ghosn. He joined Wachtell last month. The firm has advised major companies and boards on litigation and governance, and has conducted investigations for the NBA. A profile of Kim and the firm details that experience.

That résumé may help make the inquiry credible, but independence is not established by a name alone. It depends on the investigator’s access to records and people, the scope set by the board, and whether the board lets him report his findings without undue constraint. Nvidia says Huang will keep leading the company while Kim investigates, and that Huang will have no role in selecting outside counsel. The directors, in turn, will have to decide how much authority to give Kim and what to do with his conclusions. The selection followed early discussion of another law firm, one that had a longstanding relationship with Nvidia, raising concern that its appointment could have invited questions about independence.

The board faces scrutiny of its own. Nvidia’s ten directors have served a combined 161 years, and several have longstanding business ties to Huang. Two early investors joined the board in 1993, the year he co-founded the company; their Nvidia holdings have been worth billions. Former employees have described Huang as treating the board largely as a formality, while the company has no obvious successor if he must leave. Reports also describe a management structure in which more than 50 executives report directly to him, and say he resisted succession planning because he feared it could set executives against one another. These are governance concerns, not proof that directors cannot do their job. But this is precisely the sort of moment in which their independence must be visible.

There is also a broader web of financial exposure. Nvidia is central to the AI infrastructure boom, has invested in numerous companies in the sector, and has entered into large financing arrangements. Wachtell’s client work includes OpenAI, in which Nvidia is a major investor and whose data centers rely on Nvidia chips. That overlap does not demonstrate a conflict in this investigation. It does make careful disclosure and clear boundaries more important, particularly when the company’s decisions and relationships reach across the same industry.

Markets have already registered the uncertainty, though not in a way that isolates the effect of the scandal. Nvidia shares fell more than 10 percent after news of the affair emerged, wiping out roughly $500 billion in value over two days. The decline came on top of a longer slide: shares had fallen 31 percent from their October 6 record, reducing market value by more than $1.7 trillion. The numbers are striking, but they do not show that the investigation alone caused the losses. Investors are weighing a company valued around $4 trillion, a wider stock decline, and doubts about how a highly influential business would function if its board sidelined its longtime chief. The market reaction and its context are part of the story, not a verdict on the allegations.

For my part, the most useful test will be whether the board can explain the process without pretending it already knows the answer. A credible inquiry should distinguish evidence of a relationship from evidence of espionage, and both from evidence of any compromise. Nvidia’s directors have a chance to show that oversight is more than a promise made after the market gets nervous.