Nvidia Stock Drops 7% as Board Prepares to Oust CEO Jensen Huang

Nvidia's stock fell 7% in after-hours trading on Wednesday after The Wall Street Journal reported the company's board is preparing to remove CEO Jensen Huang.

The selloff caps a week of escalating turmoil at the world's most closely watched chipmaker. On Sunday, Huang admitted to an extramarital affair in a memo to employees and said he was cooperating with a board investigation. He did not name his affair partner.

What did the board reveal this week?

Days before Wednesday's report, Nvidia's board said it was investigating whether Huang was the target of a foreign intelligence effort. That probe followed the CEO's acknowledgment of the affair.

The New York Times had previously reported that US intelligence officials believed Alice Huang, a tech executive who had grown close to the CEO, was recruited to gather information for Beijing. That earlier reporting connected the personal scandal to a national-security question — and moved it from tabloid territory into boardroom risk.

The Wall Street Journal's Wednesday report, citing the board's preparations to oust Huang, signals the directors' concerns have moved past fact-finding.

What are the new allegations?

The New York Times reported new allegations on Wednesday, saying Huang had a second extramarital affair — this time with an executive at Nvidia who reports directly to him. The Times cited five unnamed sources who worked at the company.

A relationship with a direct subordinate raises governance questions that go beyond the first affair, because it touches on Nvidia's internal reporting lines and its handling of conflicts of interest at the top of the company.

Nvidia has not commented on The New York Times report and did not respond to a request for comment from Business Insider.

How did investors react?

The market's verdict came fast. Nvidia shares dropped 7% after hours on Wednesday, moments after the Journal's report dropped and the Times' new allegations landed the same day.

For context on the stakes: Huang co-founded Nvidia and has run it as president and CEO through its rise to the top of the AI chip market. The company's market value has been built largely on investor confidence in his leadership, and a forced exit of a founder-CEO is the kind of event that repricings happen around.

What happens next?

Three threads are now running in parallel:

• The board's ouster preparations, per The Wall Street Journal.
• The ongoing investigation into whether Huang was targeted by a foreign intelligence effort.
• The unanswered questions around the second alleged affair with a subordinate, which Nvidia has not addressed.

Huang's Sunday memo — his only public statement so far — acknowledged one affair and pledged cooperation with the board. He has not spoken to the second set of allegations, and the company's silence leaves the new reporting standing without challenge.

The open question is whether the board acts before the foreign-intelligence investigation concludes, or waits for its findings. Either way, a 7% after-hours drop shows investors are already pricing in the possibility that Nvidia's next earnings call happens without Jensen Huang at the helm.

By Grace Kim