Nvidia shares fell 6.4% on Tuesday, extending a recent pullback as investors digested reports that billions of dollars of restricted AI processors may have been routed to China and that the FBI is examining the matter, with CEO Jensen Huang drawn into the scrutiny.
According to The Information, roughly $7.5 billion worth of Nvidia chips were delivered to Chinese companies through a network allegedly connected to Alice Huang, an executive US officials suspect of working with Chinese intelligence. She is not related to the Nvidia chief executive. Alice Huang previously held a senior role at Singapore-based Megaspeed International.
How the chips were allegedly routed
The report describes a structure built by Alice Huang alongside her husband and sister, involving companies in China and Singapore. One entity, Shanghai Century Litong, reportedly received preferred cloud partner status from Nvidia in 2023, a designation that provided priority access to constrained supplies of advanced accelerators. The company was also linked to Megaspeed.
Through this network, approximately 240,000 processors — including export-restricted models such as the H100, H200 and A100 — are said to have been moved into China. Some of that computing capacity was reportedly used by major Chinese technology firms, including Alibaba and Tencent.
The alleged arrangement involved shipping hardware to data centres in countries such as Malaysia and Indonesia, then leasing the computing capacity online to customers in China. That approach would keep the physical chips outside Chinese borders while still serving Chinese users.
Export controls and the policy backdrop
Washington imposed restrictions on exports of advanced Nvidia AI processors to China in 2022, citing concerns over Beijing's technological and military capabilities. The Trump administration later allowed limited sales of the H200 to approved Chinese buyers under licensing arrangements.
President Donald Trump said on Monday that the FBI was looking into the matter. He added that Huang told him he had no knowledge that Alice Huang was a suspected spy, and said he believed the Nvidia CEO would "be in good shape." Trump also suggested he might include Huang on an upcoming trip to China, though that remains uncertain.
Beijing has dismissed the allegations as groundless. Megaspeed said in a LinkedIn statement that investigations by US authorities and others had found "no evidence of any violations concerning the illicit transfer of chips or any illegal activities."
Board investigation and market reaction
Nvidia's board has launched an independent investigation and said it has no reason to believe company secrets or national security were compromised. The CEO remains in his position.
Despite the pressure on the stock, some investors appear willing to buy the dip. ARK Invest CEO and chief investment officer Cathie Wood purchased 90,443 Nvidia shares across her firm's exchange-traded funds, according to a Monday trading disclosure. Based on Nvidia's Monday closing price, those purchases were worth slightly more than $16 million, assuming the transactions took place that day.
Wall Street analysts have shown limited reaction so far, with the average price target around $332, according to FactSet. Citi analyst Atif Malik cut his price target to $285 from $315, citing lower valuations across chip stocks and the investigation involving Nvidia's CEO. Malik said "long-term leadership stability risk is among key investor concerns." APAC Research upgraded Nvidia to Buy, describing the investigation as more of a public-relations and damage-control exercise than evidence that Huang had been compromised, and said it would be surprised if the stock did not rebound, while acknowledging the uncertainty.
This article is for informational purposes only and does not constitute financial advice.
