Nvidia’s crisis has corporate governance experts reaching for the popcorn

Nvidia’s shares fell 5.47% on Tuesday after dropping 4% the day before, despite little new company information. The board has hired Wachtell, Lipton, Rosen & Katz to investigate CEO Jensen Huang’s reported affair with Alice Huang, whom US intelligence agencies suspect of spying for China, a situation with no clear precedent for corporate governance experts.

The investigation may examine whether laws or company policies were breached, whether Nvidia’s board was misled, and what Jensen Huang knew and when. Nvidia says it has no reason to believe national security or company secrets were compromised; the significance depends partly on whether sensitive information was obtained. A proposed class action already alleges Nvidia and Huang misled investors, while experts expect shareholder suits and say a mismanagement claim would be harder to bring.