Nvidia hires Wachtell to investigate Jensen Huang’s relationship

By Rebecca Stone

The Jensen Huang espionage scandal has erased $430 billion from Nvidia’s market value as shareholders gauge the potential effect on the company and on an executive synonymous with the AI boom.

Nvidia, the $4.1tn (£3tn) chipmaker, has appointed New York-based Wachtell, Lipton, Rosen & Katz to conduct what it calls a “thorough and independent” investigation into Huang’s relationship with an alleged Chinese spy.

The inquiry carries weight beyond one executive because Huang co-founded Nvidia and remains the public face of its AI business. Nvidia gave no timetable, but it said Huang would continue to lead the business “without interruption.”

The market loss gives the review direct valuation consequences. The company has given investors no timetable, leaving the inquiry to operate as a governance and stock overhang.

Why did Nvidia choose Wachtell?

Wachtell is one of the most prestigious corporate law firms in the US. Its founding partner, Martin Lipton, invented the “poison pill defence” in the 1980s, a mechanism that gives boards leverage against unwanted takeover bids.

Technically called a “shareholder rights plan,” the mechanism works in two stages:

• It allowed investors to buy more shares at a discount if one shareholder acquired a specified percentage of the company’s stock.
• That made it harder for corporate raiders to acquire a company without board approval.

Wachtell was closely involved in the takeover of Getty Oil by Texaco, then the largest corporate takeover in history. The deal turned bitter when the thwarted suitor Pennzoil sued Texaco and won.

In 2008, a team of Wachtell lawyers advised the US Treasury Department on the takeover of Fannie Mae and Freddie Mac during the financial crisis.

Wachtell was founded in the 1960s and is said to be the most profitable law firm in the US. The Am Law 100 rankings put revenue at $5.1m per lawyer last year and profit at $12m per partner. Those were the highest profits per partner ever, according to the rankings.

That profile gives Nvidia experience in board-level defense, crisis response and sensitive investigations. The takeover history differs from the current case, but Wachtell’s crisis-management practice makes the appointment relevant to a dispute involving the chief executive.

Who will lead the investigation?

Wachtell partner Joon Kim will lead the review. The firm’s website describes Kim, a former government prosecutor in New York, as a specialist in internal investigations, white-collar criminal and regulatory defence, and crisis management.

Kim served as acting US attorney for the Southern District of New York from 2017 to 2018. He ran a team of lawyers investigating securities and commodities fraud, mail and wire fraud, public and private corruption, money laundering, cybercrime and tax offences.

The cases under his supervision included:

• Former US representative Anthony Weiner, who was sentenced to 21 months in prison for sending obscene material to a minor.
• Banker Mehmet Hakan Atilla, whose prosecution Kim oversaw. Atilla was convicted in 2017 of helping to evade US sanctions on Iran.

Another high-profile assignment landed on Kim’s desk in 2021, when he investigated multiple allegations of sexual harassment by the then New York governor, Andrew Cuomo.

Kim’s record spans financial crime, sanctions enforcement, public corruption and allegations against a governor. The breadth of that record does not determine the outcome of the Nvidia review, but it gives the company a lead investigator with senior prosecutorial experience.

What triggered Nvidia’s investigation?

The sequence of disclosures established the inquiry’s scope:

• Reports said Huang had been having an affair with Alice Huang, an alleged Chinese spy who was also an Nvidia customer. Alice Huang is not related to the Nvidia chief executive.
• Nvidia initially denied an improper relationship with the Chinese citizen.
• On Sunday, Huang admitted he had been unfaithful to his wife without referring directly to Ms Huang.
• On the same day, Nvidia announced an investigation into reports that Huang “has been the target of a foreign intelligence effort.”

The distinction between those disclosures matters. Huang acknowledged infidelity, but Nvidia framed its review around reports of a foreign intelligence effort. The announcement did not declare Ms Huang a spy or state a finding against Huang.

That leaves the central factual questions unresolved: whether a foreign intelligence operation targeted Huang, and how Nvidia should weigh the alleged conduct and the confidence of its shareholders.

US ambassador to China David Perdue told Bloomberg Television:

“The situation with Nvidia is another reminder that we have to stay diligent.

“National security is part of this economic conversation because economic security is national security. And so, what we’re doing with China is bumpy right now.”

Perdue’s warning placed the company inside a broader US-China economic dispute. His language also explains why an alleged corporate espionage case can affect policy, not only shareholder confidence.

How much risk do investors assign?

Tech analyst Dan Ives put Huang’s chances of removal as Nvidia chief executive at 15%. He assigned an 85% probability that Huang would remain chief executive after the board investigation.

In a note to investors, Ives wrote:

“Right now the Street and investor chatter is assigning roughly a 15% chance he is removed as CEO of Nvidia with a high probability (85%) he stays on as CEO after the board investigation is completed.”

“We would expect a board investigation that could take four weeks to six weeks and will create a clear overhang on the stock until more news emerges from Nvidia.”

His estimate makes the review a near-term stock event even without a formal deadline. The four-to-six-week forecast provides a benchmark, but Nvidia has not committed to that schedule.

Jeffrey Sonnenfeld, the senior associate dean for leadership studies at the Yale School of Management and founder of the Chief Executive Leadership Institute, put Huang’s survival chances at “about 50-50.”

That estimate contrasts with Ives’s 85% staying scenario. Neither forecast reflects a finding from Wachtell, and the divergence shows how much weight investors still place on the board investigation’s result.

What happens next?

Nvidia has not set a timetable for Wachtell’s review, and Huang remains in charge while the investigation proceeds. Three variables will shape the next stage:

• The time Wachtell takes to complete the review, measured against Ives’s four-to-six-week estimate.
• Whether the findings clarify the reported foreign intelligence effort and the nature of Huang’s relationship with Ms Huang.
• Whether the board retains Huang as chief executive after the review.

For investors, the next material signal will come from Nvidia’s timing and the review’s findings, two variables that remain unset.