Investing.com -- Allegations that Nvidia (NASDAQ:NVDA) CEO Jensen Huang had a relationship with a suspected Chinese intelligence source will at best be a "heavy distraction" and at worst give "significant ammunition" to lawmakers on both sides of the aisle, brokerage Bernstein said on Monday.
Bernstein said demand for the chipmaker's products seems unlikely to be affected, but regulatory risks could rise as AI buildouts become a bigger political issue, and the news is likely to keep Nvidia at the center of that debate.
Bernstein rates Nvidia "outperform" with a $400 price target. The stock closed at $186.64 on Nov 6 and traded at $178.70 after hours, down 4.25% from the close.
The risks come from two directions, Bernstein said: lawmakers who take a hard line on China and are already unhappy with the current U.S. stance toward the country, and incoming Democrats unhappy with the close ties to Trump that Huang has built over the last few years.
Bernstein also flagged what it called key man risk, meaning heavy reliance on one person. Huang sets Nvidia's long-term strategy and, with supposedly 60 direct reports, pulls most of the company's strings himself, it said.
It is not immediately clear who would or could step in if he were unwilling or unable to lead. The main beneficiary of his removal would clearly be China, it said.
Bernstein said the romantic nature of the relationship with Alice Huang, a technology executive at Megaspeed, appears confirmed, while the spy allegations look more tenuous for now because they rely on anonymous sources. It said some of the espionage claims so far rest more on appearance than substance, though it called the matter a very bad look.
One worry is that Alice Huang might have influenced Huang to lobby for more chip sales into China.
Bernstein said he has lobbied for that for years and China sales remain low. China, including Hong Kong, made up 8% of Nvidia's revenue in the fiscal second quarter of 2027, Bernstein's chart showed.
The chips Washington currently allows into China, the H20 and the H200 in limited amounts, are low-end and multiple generations behind the state of the art, Bernstein said, and are not selling there mainly because China is pushing back in favor of its own products.
Nvidia's board said on Sunday it was starting an independent investigation and had no reason to believe national security or company secrets were compromised. Huang admitted the affair in a memo to staff, Investing.com reported.
Three Republican House committee chairs asked Huang on Nov 5 to attend a closed-door briefing on Nov 18 about Nvidia's espionage protections and his dealings with Alice Huang.
Bernstein said it appears to be a request, not a subpoena. Democratic Senator Chris Coons said Congress would investigate.
U.S. President Donald Trump told reporters in Palm Beach, Florida, on Sunday evening that Huang is "a fine person… I think he's an honorable guy" and has "done an amazing job for the country."
He said he had not spoken to Huang about the allegations. Asked whether he would take Huang on a trip to Asia next week, Trump said, "I don't know, but I'd certainly take him."
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