Nvidia retains Wachtell to probe CEO Jensen Huang conduct

Nvidia has appointed the New York law firm Wachtell, Lipton, Rosen & Katz to conduct a thorough and independent investigation into the personal conduct of its chief executive, Jensen Huang. The move follows a series of reports alleging that the Nvidia boss was involved in an affair with an alleged Chinese spy, a situation that has triggered an espionage scandal and significant market volatility for the chipmaker. The board of directors has tasked the firm with overseeing the inquiry, which is being led by Wachtell partner Joon Kim, a former government prosecutor in New York. Kim is described by the firm as a specialist in internal investigations, white-collar criminal and regulatory defence, and crisis management.

Nvidia stated that Huang will continue to lead the business he co-founded without interruption, although the company did not provide a specific timeframe for the completion of the investigation. A committee of independent board directors, assisted by Kim and the legal team, will supervise the process. The investigation was announced on the same day that Huang admitted to being unfaithful to his wife, though he did not directly reference the alleged spy, Alice Huang, in his statement. The company had initially denied any improper relationship with the Chinese citizen, who is reportedly an Nvidia customer and no relation to the chief executive. The admission followed reports that Huang had been the target of a foreign intelligence effort.

The controversy has had a marked impact on the company’s share price. Nvidia’s stock fell by more than 8% in extended trading after the Wall Street Journal and the New York Times reported that Huang had engaged in another affair with an executive who reports to him. Prior to this latest development, shares had staged a recovery on Wednesday, closing up 2.9% to $173.73. This gain helped narrow the loss in market capitalisation, which had reached $311bn since Friday. The broader AI sector also saw positive movement, with shares in CoreWeave jumping more than 24% after the AI infrastructure company reported strong revenue growth.

The appointment of Wachtell, Lipton, Rosen & Katz is considered significant given the firm’s reputation as one of the most prestigious corporate law practices in the United States. The firm, founded in the 1960s, is reportedly the most profitable law firm in the country, with revenues of $5.1m per lawyer and profits of $12m per partner last year, according to Am Law 100 rankings. Wachtell is historically known for its involvement in major corporate transactions, including the takeover of Getty Oil by Texaco and advising the US Treasury department on the acquisition of Fannie Mae and Freddie Mac during the 2008 financial crisis. The firm is also credited with inventing the poison pill defence in the 1980s, a strategy designed to prevent hostile takeovers.

Joon Kim’s background includes a tenure as the acting US attorney for the southern district of New York from 2017 to 2018. During that period, he oversaw investigations into securities fraud, corruption, money laundering, and cybercrime. Notable cases under his supervision included the prosecution of former US representative Anthony Weiner and banker Mehmet Hakan Atilla, who was convicted of helping to evade US sanctions on Iran. In 2021, Kim also led the investigation into multiple allegations of sexual harassment against then New York governor Andrew Cuomo.

Market analysts have offered varying assessments of Huang’s future at the company. Dan Ives, a tech analyst, suggested in a note to investors that there is roughly a 15% chance Huang will be removed as CEO, with an 85% probability that he will remain in the role after the board investigation is completed. Ives estimated the investigation could take four to six weeks, creating an overhang on the stock until further news emerges. However, following reports of the second extramarital affair, the Wall Street Journal reported that the board was preparing to oust Huang. Jeffrey Sonnenfeld, senior associate dean for leadership studies at the Yale School of Management, assessed Huang’s survival chances at about 50-50.