Nvidia shares closed 4.3 per cent lower on Monday after Donald Trump confirmed the FBI is investigating chief executive Jensen Huang's affair with a suspected Chinese spy — a rare slide on a day when the wider US market rallied hard.

The stock plunged almost nine per cent earlier in the session before recovering part of the loss. Investors spent the day pricing the potential fallout from a federal investigation into the founder of the world's dominant AI chipmaker, a man who has run the company since 1993 and embodies its $3-trillion-plus market position.

The contrast with the rest of the market was stark. The S&P 500 jumped 2.35 per cent and the Nasdaq 100 climbed 3.4 per cent as US tech stocks rebounded from last week's bruising sell-off. Nvidia moved in the opposite direction.

What did Trump actually say?

Speaking at the White House on Monday, Trump confirmed that federal investigators were examining the allegations. He also defended Huang after speaking to him directly.

"I know the FBI is looking into it," Trump told reporters, adding that he believed Huang would be "in good shape".

The president said Huang had denied knowing that the woman was allegedly working for Chinese intelligence. That denial now sits at the centre of the FBI's work: whether the chief executive of America's most strategically important chip company knew, or should have known, who he was dealing with.

For executives, the lesson is uncomfortable. A personal misconduct story has become a national security file because of the target's position. The same affair at a consumer goods company would not have moved a stock nine per cent intraday.

Who is the woman at the centre of it?

The investigation follows reports that Huang had a relationship with Alice Huang, a former executive at Megaspeed, a Singapore-based data centre company. US intelligence officials reportedly identified her as a Chinese intelligence asset.

Huang admitted on Sunday that he had been unfaithful to his wife and apologised to employees and his family.

"My actions hurt her and our children. There is no excuse for what I did. I am deeply sorry," he said.

Nvidia's board has since launched an independent investigation into whether its chief executive had been targeted by a foreign intelligence operation. That framing — Huang as potential victim rather than perpetrator — is the company's central defence. The board is effectively asking whether a Chinese service ran an operation against the CEO of the firm that controls roughly 80 to 90 per cent of the AI accelerator market.

The company has held its line publicly. Nvidia said there was "no reason to believe" that national security or confidential information had been compromised, and it reiterated its confidence in Huang.

How far is the political fallout spreading?

The controversy has reached Capitol Hill, and the demands there go beyond the boardroom.

• Hakeem Jeffries, the Democratic House leader, said there were "real concerns that need to be addressed".
• The House Select Committee on China has requested a closed-door briefing with Huang.
• Lawmakers are demanding greater scrutiny of Nvidia's security arrangements.

The House Select Committee request matters most. A closed-door briefing puts Huang face to face with legislators who oversee US policy toward Beijing — the same legislators who shape export controls that determine which markets Nvidia may sell into. Huang's answers in that room could affect commercial policy, not just his own position.

What does this change for Nvidia's leadership question?

The investigation has intensified a long-running question: Nvidia's dependence on its founder. Huang has led the company since 1993 and has been the single driving force behind its pivot into AI accelerators.

Until now, succession risk at Nvidia was treated as theoretical. On Monday it acquired a concrete trigger. If the FBI inquiry escalates, or if the House briefing goes badly, the board faces a decision no Nvidia director has had to contemplate seriously: the company's roadmap, customer relationships and supplier leverage are all built around one person.

Investors signalled that calculus with their feet. A 4.3 per cent decline on a day the Nasdaq rose 3.4 per cent is a roughly 7.7 percentage point underperformance — a spread that measures perceived governance risk, not chip demand.

What happens next?

Three processes now run in parallel, and any one of them can move the stock.

First, the FBI investigation, confirmed by the president himself. Second, the board's independent review, which will test the "targeted by a foreign intelligence operation" framing. Third, congressional scrutiny, starting with the House Select Committee on China's requested briefing.

Nvidia's defence rests on two claims: that no national security or confidential information was compromised, and that Huang did not know the woman's alleged affiliation. Both will face pressure from investigators and legislators rather than from the company's own communications team.

For now, the board backs its chief executive. The market, Congress and the FBI will decide how long that holds.