Nvidia Shares Rebound 3.8 Percent After Two-Day Slide as Legal Questions Around Huang Linger
Nvidia shares rebounded Wednesday after two straight days of losses. The stock traded at $175.27 as of 2:40 p.m. Eastern time, up 3.8 percent from Tuesday’s close of $168.89. The intraday high was $177.54.
The slide had been steep. Nvidia closed Friday at $186.64, then fell to $178.67 on Monday and $168.89 on Tuesday. Tuesday’s drop was 5.47 percent. Even after Wednesday’s rebound, the stock remained 28 percent below its Oct. 6 high of $243.37.
Analyst calls helped the rebound. Raymond James raised its rating on Nvidia to Strong Buy from Outperform on Wednesday. The average Wall Street price target is around $314, about 77 percent above the current price. Jefferies started coverage of Nvidia on Wednesday with a Hold rating.
The stock rose, but the legal questions around Jensen Huang, Nvidia’s chief executive, remain. Reuters published an explainer on Wednesday laying out the potential legal exposure for Huang, Nvidia and the board. There are no new charges and no newly confirmed facts. The core issues are the shareholder class action, the possibility of a securities regulator investigation and the board’s oversight duties.
The class action was filed Monday in federal court in San Jose. The class period runs from Oct. 9 to Nov. 8. Oct. 9 is the day Nvidia denied a New York Times report about Megaspeed, and Nov. 8 is the day the board announced its investigation and Huang acknowledged an affair. Oct. 30, when Huang told Bloomberg that Nvidia’s relationship with Megaspeed was normal and not unusual, also falls inside the period. The plaintiffs say the company and Huang deceived shareholders by concealing the relationship. No damages amount has been set, and the stock fell about 20 percent during the period, wiping out about $1 trillion in market value.
The Securities and Exchange Commission could open an investigation. The regulator faces a lower burden of proof than private plaintiffs and can bar executives from serving as officers or directors of public companies. Nvidia settled a disclosure case with the commission in 2022 for $5.5 million over gaming processor sales, and an investor lawsuit over the same matter is still pending. The commission declined to comment.
The board is not free of exposure either. If the independent committee’s review finds that 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. Directors could be ordered to reimburse the company for fines or settlements it pays. The fact that several directors have served for decades and amassed enormous wealth from Nvidia stock has been raised as a factor casting doubt on their independence.
Criminal liability is unlikely. Most securities fraud cases end in civil or administrative penalties, and only a small fraction lead to criminal charges. But if Huang intentionally lied to the public about the affair to keep the stock from falling, he could face criminal punishment, and if he knew about Alice Huang’s alleged intelligence connection, he could face charges under the Economic Espionage Act. Huang has not been charged with anything, and President Donald Trump said the Federal Bureau of Investigation is looking into the matter without identifying its target or scope.
The background is this. Huang co-founded Nvidia in 1993 and has led the company as chief executive since then. The New York Times reported in October that Huang was close to Alice Huang, a former executive at Megaspeed. U.S. authorities have concluded that Alice Huang was a Chinese intelligence asset, according to the report. Megaspeed bought $4.8 billion worth of Nvidia chips over two years. Reuters said it could not independently verify the intelligence allegation, and China’s Foreign Ministry called it groundless. Huang admitted infidelity in a message to employees on Nov. 8, and the board announced an independent investigation the same day. The law firm Wachtell is handling the review, led by former acting U.S. Attorney Joon H. Kim.
The next dates are the earnings report on Nov. 17 and a closed House briefing on Nov. 18. Market expectations are earnings of $2.53 a share and revenue of $111.4 billion. The deadline for lead plaintiff motions in the class action is Jan. 8, 2027.