Nvidia shares fell more than 5% in premarket trading on Monday to just above $177, less than 12 hours after CEO Jensen Huang confirmed an extramarital affair and the chipmaker's board launched an independent investigation into reports that the woman involved was spying for Beijing.

The drop deepens an already severe slide. If Monday's premarket level holds, Nvidia will have lost more than 26% of its value in the past month, pressured first by AI-sector selloffs after the 2026 U.S. midterm elections and now by a scandal reaching the top of the company that supplies the world's most advanced AI chips.

What did Huang and Nvidia confirm?

Nvidia's board of directors published a statement on Sunday night confirming an independent investigation into reports that Huang "may have been the target of a foreign intelligence effort." The probe will be run by independent directors, assisted by outside independent counsel.

The New York Times and the Financial Times reported that Huang had an extramarital affair with Alice Huang, a senior leader at Megaspeed, a Singapore-based cloud company. U.S. intelligence services believe the woman was spying on behalf of China, the reports said. Fast Company could not reach Alice Huang for comment, and it was unclear whether she still works at Megaspeed.

The company's board said it "prioritizes U.S. national and economic security, which is paramount to the interests of NVIDIA and its shareholders," but added that it has no reason to believe company secrets or national security were compromised. Nvidia says it retains "confidence in Jensen and his leadership team."

Why does this matter beyond Nvidia?

Nvidia's most advanced chips have faced U.S. export restrictions to China for years over national security concerns. Washington fears selling the hardware to Beijing would hand China an economic and military edge in the AI arms race between the two countries.

Huang, who cofounded Nvidia in 1993, is regarded as one of the most influential leaders behind the AI revolution. Industry insiders, Wall Street and security experts fear any Nvidia information Huang discussed with Alice Huang could have reached foreign intelligence services.

Huang initially suggested the two had only normal business engagements; they had been photographed together at multiple business and social events.

What did Huang say?

In an email to employees, later published on Nvidia's website, Huang admitted the affair. "I owe my family and all of you an apology," the message began. "I was unfaithful to my wife. My actions hurt her and our children. There is no excuse for what I did. I am deeply sorry."

Addressing staff, he wrote: "You deserve better from me. Leading NVIDIA is the privilege of my life. My responsibility is to serve you and be worthy of your trust. I have fallen short of that responsibility."

He also addressed the security dimension directly: "I support the investigation and will cooperate fully. I love our country and our company. I am committed to protecting NVIDIA and supporting America's national security. I am proud and grateful to be an American."

What have Beijing and Washington said?

China denied the allegations. Foreign Ministry spokesperson Guo Jiakun told Reuters: "The so-called Chinese spy narrative is purely a groundless accusation, slander, and a smear."

Secretary of State Marco Rubio declined comment: "I just can't comment because of the nature of it. And I also can't comment on an internal corporate matter that's going on with Nvidia."

President Trump said he had not spoken with Huang: "I just know he's a fine person, but you never know what is going on. I hope everything's fine." He called Huang "an honorable guy" who has "done an amazing job for our country."

What happens next?

Dan Ives, senior managing director at Yorkville Ives & Co, told CNBC the affair will spark "multiple congressional inquiries at a minimum and will create an overhang on the stock for a myriad of reasons." Ives sees a risk Huang could be removed as CEO: "This will add risk to the stock as he is so important to the Nvidia story and strategy globally."

The scandal lands on an AI sector already wrestling with bubble fears, post-election regulatory uncertainty over data center buildouts, and growing public hostility to server farms — with Nvidia now the industry's biggest open question.