Nvidia hires Wachtell for CEO affair and spying inquiry

Priya Raman

Nvidia’s market capitalization (total market value of its shares) fell by around $430 billion after chief executive officer Jensen Huang confirmed his affair with a woman accused of spying for the Chinese state. Huang will remain in charge during the company’s investigation. The announcement sets no deadline.

What is the investigation examining?

Nvidia has appointed New York-based Wachtell, Lipton, Rosen & Katz to join a “thorough and independent” investigation into Huang’s relationship with Alice Huang. She has no relation to him. The Megaspeed executive has been accused of spying for the Chinese state.

The announcement does not state which questions the inquiry must answer or which evidence it must examine. Neither does it define the reporting process or public disclosure terms. Those details remain unstated. They are not resolved.

Who leads the inquiry?

Wachtell partner Joon Kim will lead the work. Kim served as Acting U.S. Attorney (a federal prosecutor) for the Southern District of New York from 2017 to 2018.

His stated prosecutorial experience includes:

• sanctions violations (government-imposed restrictions);
• theft of trade secrets (confidential commercial information);
• economic espionage (unlawful commercial intelligence gathering for a foreign state).

The mandate extends an existing inquiry rather than replacing it. Wachtell is adding outside legal work to the review the board already opened. Nvidia does not identify any earlier investigators or state whether they remain involved.

Kim’s record does not supply a conclusion. Nvidia has disclosed no timetable for the investigation. An independent mandate also does not guarantee a particular outcome.

Has the board already ruled out a security breach?

Earlier this week, the Nvidia board said it had opened an independent investigation into the matter. Before that investigation began, the board stated it had “no reason to believe that either national security or Nvidia secrets were compromised.” Huang has also denied that his involvement with the Megaspeed executive compromised national security.

The board’s assurance stands beside the subsequent review. It does not replace one. The statement did not set out the basis for its assessment. The new mandate does not explain how any conclusions may differ.

The announcement makes no change to Huang’s leadership role. He will continue to run Nvidia, the company he founded, during the inquiry. That continuity does not amount to a finding about his conduct. The source gives no indication of whether Huang will participate in the inquiry.

How large is the market impact?

About $430 billion came off Nvidia’s market value after Huang confirmed the relationship earlier this month. For scale, that loss exceeded the combined market capitalization of Coca-Cola, Oracle, Cisco and Palantir. A market-value decline does not represent an equal loss of cash or operating assets.

The figure is approximate. The source supplies no valuation date or calculation method. It provides no revenue, profit or transaction figure that would explain the change in company value. Investors have a large reported loss and a narrow set of disclosed facts.

A number of shareholders have filed a lawsuit against Nvidia over the losses. The source does not identify the plaintiffs, the court, the legal claims, or the amount of damages sought. Those omissions limit any assessment of the litigation’s likely financial effect on Nvidia.