Nvidia scandal wipes $2.4 billion from Korean retail investors

Korean investors have lost an estimated $2.4 billion on Nvidia shares in a scandal-driven sell-off that has wiped roughly $361 billion off the chipmaker's market value in a single day, according to Korea Securities Depository data and after-hours trading figures from Wednesday.

Nvidia shares have fallen nearly 15 percent since the company announced an investigation into allegations involving CEO Jensen Huang. The stock dropped more than 8 percent in after-hours trading Wednesday following a Wall Street Journal report that the board was preparing to remove Huang. Nvidia's market capitalization fell to about $3.83 trillion in that session, dropping the company to third place among the world's most valuable companies behind Apple and Microsoft.

The losses land hard in Korea. Nvidia is the second-most-held U.S. stock among Korean investors after Tesla. Korean investors held about $13.65 billion worth of Nvidia shares as of Thursday, according to Korea Securities Depository data, and an estimated 800,000 retail investors in the country own the stock.

Assuming retail investors maintained their holdings, the nearly 15 percent share-price decline represents an estimated $2.4 billion in valuation losses.

What triggered the sell-off?

The acceleration followed a rapid sequence of reports. The New York Times reported Wednesday that Huang had an extramarital affair with Kimberly Powell, Nvidia's vice president of health care. The Wall Street Journal then reported that the company's board was preparing to remove him, triggering the further after-hours decline.

The reports came just days after Huang acknowledged the affair, in response to separate allegations involving Alice Huang, a businesswoman suspected by U.S. intelligence officials of having links to Chinese intelligence.

The company has not concluded its investigation, and Huang's future remains unresolved. Market watchers expect the uncertainty to keep the stock volatile.

How exposed are Korean investors?

The exposure extends well beyond direct shareholdings. Some 153 exchange-traded funds (ETFs) listed on the Korea Exchange have Nvidia exposure, including several with concentrated positions:

• ACE Nvidia Bond Mixed ETF — roughly 30 percent of its portfolio invested in Nvidia, with assets of about 197.9 billion won ($148 million)
• TIGER US AI Semiconductor Fabless ETF — 28 percent exposure
• KODEX US AI Semiconductor Top 3 Plus ETF — 26.3 percent exposure

The National Pension Service, Korea's public pension fund, held about 50.8 million Nvidia shares as of June 30, worth approximately $10.17 billion at the time, according to its filing with the U.S. Securities and Exchange Commission. The fund has also seen a substantial decline in the value of those holdings.

Part of the strong reaction in Korea may stem from Huang's high profile in the country. His visits have made headlines, drawing widespread attention for informal gatherings with some of Korea's biggest business leaders and public appearances. He last visited Korea in June.

What are investors saying?

The sell-off has produced visible distress among Korean retail shareholders. One user on an online community for U.S. stock investors wrote: "I'm devastated. I've been buying Nvidia shares since the beginning of the year and now hold 130 shares. Nvidia makes up 70 percent of my portfolio, and I've already been struggling with losses from the exchange rate."

Another investor flagged contagion risk across the sector: "I never expected Nvidia to be hit by a scandal involving its CEO. What worries me more is that the controversy surrounding Jensen Huang could spill over into other memory chip and semiconductor stocks."

What happens to Nvidia's leadership and AI strategy?

Analysts say the market's attention now centers on three questions: whether Huang is actually removed, whether he would retain influence through the board or other channels if he steps down, and whether a new management team would maintain Nvidia's existing artificial intelligence investment strategy.

"The market will be watching whether Huang is actually removed, whether he would retain influence through the board or other channels if he steps down, and whether a new management team would maintain Nvidia's existing artificial intelligence (AI) investment strategy," said Seo Sang-young, an analyst at Mirae Asset Securities.

The company's earnings report due next week could add to the volatility, Seo said.

The stakes extend beyond Nvidia's own share price. The company sits at the center of the AI hardware supply chain, and its $3.83 trillion market capitalization reflects a valuation built almost entirely on demand for its data-center chips. A leadership change at the top, amid a U.S. intelligence-linked allegation involving Chinese intelligence ties, introduces political and regulatory dimensions to what began as a personal scandal.

Will Korean investors sue?

Attention is also turning to whether Korean retail investors will pursue legal action against Nvidia over their losses. A path already exists in the United States.

A shareholder class action filed in federal court in California last week accuses Nvidia and Huang of misleading investors by failing to disclose information about Huang's alleged ties to Alice Huang and potential risks to the company.

Some legal experts say joining the U.S. class action could be a more practical option for Korean investors than pursuing separate claims in Korean courts, given potential jurisdictional hurdles and procedural complexities.

For roughly 800,000 Korean retail shareholders and the National Pension Service, the coming weeks carry three pressure points: the board's decision on Huang, the earnings report due next week, and the trajectory of the California class action. Each one can move a stock that Korean investors hold $13.65 billion of, and each one remains unresolved.