NVidia shares fell sharply this week after CEO Jensen Huang resigned on Thursday amid reports of extramarital affairs, including an alleged relationship with a woman suspected by US intelligence officials of having ties to Chinese intelligence, triggering a leadership crisis at the world's most valuable chipmaker and raising concerns across the artificial intelligence industry.

Reuters subsequently reported that Huang had also had an intimate relationship with a second company employee, according to two people familiar with the matter.

The developments sent shockwaves through the technology sector, with Huang also stepping down from Nvidia's board despite holding a 3.61% stake in the company, making him its fourth-largest shareholder.

In response, Nvidia appointed Chief Financial Officer Colette Kress as interim CEO while beginning the search for a permanent successor, considering both internal and external candidates.

The company also named former Synopsys CEO and longtime director Harvey Jones as its first board chair.

Meanwhile, the leadership upheaval triggered a sharp reaction in financial markets, with Nvidia shares falling as much as 14.3% on Thursday before recovering to close 4.3% lower.

The company lost nearly $493 billion in market value during the week, ending Thursday with a market capitalization of approximately $4.01 trillion.

The sell-off also pushed NVidia’s price-to-earnings ratio to its lowest level in 14 years, with shares trading at around 12 times expected earnings following a steep decline from their October 6 record high.

The valuation marks NVidia’s weakest level since 2012, when the company was competing with Advanced Micro Devices in the video game graphics card market while struggling to establish a foothold in tablets and other mobile devices.

However, Huang's departure is not the only factor weighing on investor sentiment.

NVidia, whose graphics processing units have powered much of the global AI boom, has fallen more than 30% from its record high amid growing concerns about a potential slowdown in the construction of AI data centers.

"This is a key-person event, not a demand event. Nobody is canceling GPU orders because the CEO resigned. Historically, stocks take time to find a bottom after an abrupt CEO exit while the market works through the investigations and the search," said Erik Kratz, co-head of wealth and chief investment officer at Arena Private Wealth in Chicago.

Beyond the immediate market reaction, Huang's departure could have broader implications for US chip export policy and the global AI industry, particularly given his efforts to maintain NVidia’s access to the Chinese market and his close ties with US President Donald Trump.

The controversy has also raised questions about the Trump administration's oversight of semiconductor sales to China, potentially drawing senior officials, including Commerce Secretary Howard Lutnick, further into the growing political and regulatory scrutiny surrounding the company.

The scandal that preceded Huang's resignation developed over more than a year, beginning with an October 2025 New York Times report linking him to Alice Huang, a former executive at Singapore-based Megaspeed, an NVidia cloud partner that reportedly had priority access to the company's chips.

Subsequent reports indicated that US intelligence officials believed Alice Huang was acting on behalf of Chinese intelligence, although Beijing has denied that she was a spy.

Earlier this month, NVidia’s board launched an investigation, led by independent directors and supported by outside legal counsel, into whether Huang had been targeted by a foreign intelligence operation.