Nvidia shares fell sharply in after-hours trading on Wednesday after reports that the chipmaker's board was weighing whether to remove chief executive Jensen Huang, wiping out the gains the stock had made during the regular session and dragging US stock futures lower.

The shares shed $14.95 to trade at $158.78 in extended trading, a fall of 8.6% from the regular-session close of $173.73, according to Moneycontrol. Bloomberg reported that the drop reached 10% in late trading. The sell-off followed a day in which Nvidia had closed 2.92% higher at $173.73, as technology shares led Wall Street higher.

What the reports said

The New York Times reported that Huang had a relationship with Kimberly Powell, Nvidia's vice president of healthcare, who reported to him, citing people who worked at the company. The Wall Street Journal then reported that Nvidia's board was preparing to oust Huang, and Reuters reported that the board met on Wednesday to decide his future. Bloomberg reported separately that Nvidia has been working with an outside firm to identify possible replacements.

No decision has been announced. Huang remains chief executive, and Nvidia did not comment on the board meeting when asked by Reuters, according to a report carried by The Korea Times. The board had backed Huang on 8 November, when it opened an independent investigation after reports that he was the target of a foreign intelligence effort.

Why the board is under pressure

The reports are the latest escalation in a leadership crisis that has already cost Nvidia heavily in the market. Huang admitted over the weekend to an affair with a woman alleged to be a Chinese intelligence asset, and the affair has drawn scrutiny from lawmakers, investors and customers. Senior House Republicans have warned that Congress is prepared to issue subpoenas compelling Huang to testify about his involvement with the woman, who is suspected by US intelligence officials of working for China's Ministry of State Security.

The controversy follows reports concerning Alice Huang, an executive at Singapore-based Megaspeed International, who is suspected of working for Chinese intelligence. Megaspeed, which was spun out of a Chinese gaming enterprise, has been under US investigation for months over potential chip smuggling, Bloomberg reported. The board hired the law firm Wachtell, Lipton, Rosen and Katz to investigate Huang's relationship with an executive suspected of ties to Chinese intelligence.

Investors have been weighing what Nvidia would look like without the man who founded the company and has been its only chief executive. The stock had already fallen sharply earlier in the week: reports put the two-day sell-off before Wednesday at more than $430 billion of market value erased. Nvidia shares fell 5.5% on Tuesday as the probe widened, and the company faces a shareholder lawsuit over the affair disclosures.

Market reaction

The after-hours fall in Nvidia pulled the wider market with it. Nasdaq-100 futures lost about 1%, while S&P 500 futures fell 0.4% and Dow futures were little changed. AMD and Broadcom, Nvidia's rivals in artificial intelligence chips, each rose more than 3% in extended trading, in what traders described as a separation trade away from Nvidia.

The contrast with the regular session was stark. The S&P 500 ended Wednesday 1.3% higher, the Nasdaq 100 added 2.3% and the Dow Jones Industrial Average rose 0.5%, helped by an upbeat outlook from CoreWeave that revived confidence in artificial intelligence spending. The S&P 500 technology sector climbed 2.7%.

What happens next

Nvidia is scheduled to report quarterly results on 17 November, which will now be watched even more closely for any comment from the board or from Huang himself. Until then, investors have only the reports to go on: the board has not said whether it will keep Huang, remove him, or take any other action, and the company has not confirmed that a successor search is under way.

For a company at the centre of the artificial intelligence boom, the uncertainty is itself the story. Huang has overseen a rise in Nvidia's share price of more than 700,000% since the company was founded, according to Moneycontrol, and the question now facing the board is whether it can keep that record intact while the scrutiny of its chief executive continues.

Sources: Bloomberg via Moneyweb and Moneycontrol via TradingView.