Nvidia, Huang Face $1 Trillion Class Action Over Concealed Affair

Nvidia shareholders lost roughly $1 trillion in market value — a 20% drop — between October 9 and November 8, and a proposed class action filed Monday in San Jose federal court says the company and CEO Jensen Huang defrauded them by concealing the reason.

The suit names investors who bought the stock during that window. It opens on October 9, when Nvidia denied claims in a New York Times report about Megaspeed's ties to China, and closes on November 8, when the board announced its investigation and Huang admitted an affair. The period includes October 30, when Huang told Bloomberg that Nvidia's relationship with Megaspeed was "normal and not unusual."

The stakes run well beyond one lawsuit. Here's the full exposure map.

What are the underlying allegations?

The New York Times reported last month that Jensen Huang had a relationship with Alice Huang, an unrelated former executive of Singapore-based Megaspeed. US authorities investigated her and concluded she was a Chinese intelligence asset, according to the report. Megaspeed itself has faced US scrutiny over suspicions it helped Beijing access Nvidia's advanced AI chips, whose export to China Washington has restricted since 2022.

On Sunday, Huang admitted he was unfaithful to his wife without detailing the relationship, and Nvidia's stock fell. Trump said Huang told him he had no idea the woman was a spy. Huang has not been accused of criminal wrongdoing.

Reuters could not independently verify the intelligence allegation — China's foreign ministry called it "groundless" — nor Alice Huang's current employment status with Megaspeed. Nvidia said its board has "no reason to believe" US national security or company secrets were affected, though an independent director committee will review all available information. On Tuesday, the company said that committee hired Wachtell, Lipton, Rosen & Katz to assist the investigation.

What does the securities fraud case require?

Plaintiffs must show Nvidia and Huang knowingly misled investors, that investors relied on those statements, and that the misleading statements artificially inflated the stock. The complaint doesn't specify damages, but the roughly 20% class-period decline gives lawyers a big number to work with — about $1 trillion in market value evaporated.

These suits typically follow large stock drops, and more filings are likely.

Could state regulators move in?

Some states have their own securities laws, and their attorneys general have used them aggressively. New York's Martin Act is the most powerful — the state has used it to police Wall Street, including an insider trading case brought this year — and it allows the attorney general to pursue criminal claims. No state has brought claims so far, and New York's attorney general did not immediately respond to a request for comment.

What about the SEC?

The SEC could investigate whether Nvidia made false or reckless disclosures that misled investors. The regulator carries a lower burden of proof than a private class action and can obtain remedies private plaintiffs can't — such as barring individuals from serving as officers or directors of public companies.

There's precedent. In 2022, under President Joe Biden, Nvidia settled SEC allegations that it made inadequate 2018 disclosures about growth of its gaming-market processors. The company paid a $5.5 million fine without admitting or denying the allegations. An investor class action over the same allegations is still ongoing. The SEC declined to comment on the current matter.

Are the directors exposed too?

Potentially. If the independent committee's investigation reveals the board lacked a proper system for monitoring the business — or ignored warning signs around Megaspeed, chip smuggling or Huang's relationship — shareholders could sue. Courts can order directors to reimburse the company for fines or settlements Nvidia pays.

Investors, including state pension funds, can also use shareholder rights to demand internal records and probe the board for conflicts. Several directors have served for decades and hold enormous wealth in Nvidia stock — a factor judges have cited when questioning director independence.

Could this become criminal?

Only a small fraction of securities fraud cases end in criminal charges; most are resolved through civil or administrative enforcement. But a federal statute enacted under the Sarbanes-Oxley Act of 2002 criminalizes schemes that knowingly defraud investors through false pretenses. Prosecutors would need to show Huang lied to the public specifically to prop up the stock price, not merely to avoid personal embarrassment.

Trump confirmed an FBI probe exists but stayed vague on targets and scope. "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 Monday at a White House briefing.

There's one more edge. If Huang knew about Alice Huang's alleged intelligence connection, he could face liability under the Economic Espionage Act, a 1996 law punishing misappropriation of trade secrets to benefit a foreign government.

The timing compounds the pressure. News of the affair broke just as Democrats took control of Congress in the November 3 midterms, propelled partly by anti-AI and anti-corruption sentiment — meaning Nvidia now faces a hostile political audience alongside its legal ones.