Nvidia shares fall more than 6% as investigation begins into alleged targeting of its CEO
Key Facts
Nvidia shares fell more than 6% on Tuesday, November 10, after declining 4.3% in the previous session, Reuters reported, citing market data. The stock closed at $166.90, compared with $178.67 on November 9, according to EL7 data. The shares came under pressure as scrutiny intensified over reports that CEO Jensen Huang had been targeted in an alleged foreign intelligence effort. The company’s board said it had begun an independent investigation into the reports, adding that it saw no reason to believe national security or Nvidia’s secrets had been compromised. Reuters said the cumulative losses over the two sessions put the stock on track to erase more than $470 billion from the company’s market value.
The board said a committee of independent directors would oversee the investigation with the assistance of independent outside legal counsel, and that Huang supported the review and had pledged to cooperate. The Associated Press said President Donald Trump had stated that the FBI was investigating Huang’s relationship with a person suspected of being an agent of the Chinese government. Trump added that he had spoken with Huang and believed the CEO “had absolutely no idea that the person involved was a spy.” In an account by The Motley Fool of a report by The Information, Huang’s relationship with a person suspected of ties to Chinese intelligence may have helped move at least $7.5 billion worth of chips to Chinese companies over several years, including chips banned from sale there. The account stressed that the allegations were unproven and that Reuters could not independently verify them.
China’s Foreign Ministry rejected the espionage allegation, calling it “an unfounded accusation, slander and distortion.” Scrutiny extended to the board, shareholders and elected officials, the Associated Press reported, while a shareholder sued Nvidia and Huang in federal court in California, accusing them of misleading investors. The agency said a succession plan if Huang were to leave remained unclear. Reuters reported that the company’s bylaws allow a majority of directors to remove Huang, with or without cause, while experts raised questions about whether directors who had spent a long time on the board could conduct a sufficiently independent investigation. Senate Minority Leader Chuck Schumer also criticized Trump’s handling of the case and called for legislation on AI chip exports.
The case coincided with broader pressure on AI stocks after the elections, as The Motley Fool linked the decline to Democratic candidates winning who had pledged to slow AI development and data-center construction. It said some sector stocks rose as investors welcomed the possibility of slower spending on data centers. But Nvidia’s business performance remained strong in its latest reported results: revenue was $96.2 billion in the second quarter of fiscal 2027, which ended July 26, up 18% from the previous quarter and 106% year over year. Data-center revenue was $89.0 billion, up 117% year over year. These figures provide context for the current pressure, as the market weighs the company’s exposure to China and political risks alongside the growth outlook’s reliance on data-center demand.
In its guidance for the third quarter of fiscal 2027, Nvidia forecast revenue of $108.0 billion, plus or minus 2%, and a gross margin of 74.0%, plus or minus 50 basis points. The company said the forecast assumed no data-center computing revenue from China. The Motley Fool reported that management had previously indicated sales growth of about 70% next year and described the outlook as supply-constrained. By contrast, Wall Street estimates cited by the source pointed to revenue growth of 91% in the current year. The divergence between continued expected growth and supply constraints, along with the exclusion of China revenue from quarterly guidance, reflects what investors are watching in the upcoming results.
Nvidia is scheduled to report third-quarter fiscal 2027 results on November 17, with the company’s general release due at about 1:20 p.m. Pacific time, ahead of the earnings call at 2:00 p.m., according to the company. The estimates cited by The Motley Fool include sales growth of about 90% for the quarter and earnings per share of $2.47, compared with $1.30 in the same quarter a year earlier. The results and guidance will be a near-term milestone for assessing whether demand for AI infrastructure is holding up amid political and legal scrutiny. Until then, the independent investigation announced by the board remains part of investors’ monitoring of the allegations’ impact on the company. The company’s assumption of no data-center computing revenue from China will also remain a stated element of its estimate for the coming quarter.