Hundreds of billions of dollars have been wiped off the value of Nvidia after the US chipmaker announced an independent investigation would be carried out into its chief executive’s affair with an alleged Chinese spy.

The tech firm saw its shares fall by about 6% on Monday after Jensen Huang admitted having an extramarital affair.

Nvidia’s probe came after reports that the US believed the Nvidia boss had been targeted in an espionage campaign by China.

However, China has rejected the claims, with its foreign ministry saying “allegations about Chinese spies were “entirely groundless, speculative and intended to smear and malign China”.

Nvidia said it had no reason to believe the company’s secrets or national security were compromised, but a statement by the firm’s board of directors said it would begin an investigation in “light of recent reporting that founder and chief executive Jensen Huang has been the target of a foreign intelligence effort”.

US intelligence officials believe Alice Huang, also known as Huang Le, was a spy for Beijing, according to a New York Times report, external.

The report said Secretary of State Marco Rubio sent a memo to top officials in Washington last spring warning that the Nvidia boss was in a close relationship with a Chinese spy.

Alice Huang was managing director of Singaporean company Megaspeed, which has had dealings with Nvidia.

Huang admitted he was “unfaithful” to his wife and apologised for hurting her and their children. He added he was “committed to protecting Nvidia and supporting America’s national security” and would cooperate with the investigation.

After the investigation was announced, other big tech bosses, including Elon Musk, came out in support of Huang to continue leading the firm.

US President Donald Trump said the Nvidia boss was an “honourable guy”.

However, the news sparked a sell-off in Nvidia’s shares, with about $250bn (£190bn) wiped of the company’s market value.

While Nvidia shares fell, the US stock market opened on a positive note on Monday after last week’s turmoil, with Nvidia’s rival chipmakers benefiting.

But analysts suggested the hit to the company would be short-lived. Victoria Fernandez, chief market strategist at Crossmark Global Investments said investors would not abandon Nvidia, because the chipmaker was so central to the AI industry.

“Nvidia is the core of this AI trade, and without them, all these other pieces start to fall apart because the financing’s not there,” she told the BBC.

Huang co-founded Nvidia, which is central to making the hardware for emerging AI technologies, with two other engineers in 1993.

Its chips were initially designed for gaming, but Huang decided to turn its focus on AI development, turning it into the world’s second most valuable company.

A key concern for investors going forward is what would happen to Nvidia if Huang was removed from the company, as Fernandez said there was “no natural successor” to the chief executive.

Huang, unlike other founders in the tech industry, is vulnerable to any move by Nvidia’s board of directors to oust him.

He owns only around 3.5% of the company, and Nvidia operates on a single class voting structure, meaning his stake would not be enough to act as a veto power over any board decision.

By contrast, many tech founders who lead their companies, including Mark Zuckerberg of Meta and Musk of Tesla and SpaceX, hold significant percentages of multiple types of stock in their companies.

Fernandez said she does not believe the board will remove Huang as chief executive, unless there is glaring evidence of wrongdoing related to national security or intellectual property, “but I bet they start bringing someone up as his number two, to have there for the future.”

The modest fall in its shares mean investors believe it is unlikely he will step down or be removed as chief executive, but that the outcome of the investigation will be closely watched.

Even people who do not directly own shares in Nvidia can be affected by rises and falls in its value. Pensions or savings invested in pots which have stakes in the company through index tracking funds can be impacted, for example.

Nvidia chips have been a major focus of the AI race between the US and China and the White House has previously imposed controls on where its advanced products can be sold.

The H200, Nvidia’s second most advanced semiconductor, had previously been restricted by Washington over concerns that it would give China’s technology industry an edge over the US.

But Huang has been against restricting the sale of Nvidia’s chips to China, arguing that it would be better for the global rollout of AI to be powered by US technology.

In January, the Trump administration said it would allow the company to sell its H200 chips to Chinese customers under certain conditions.

Additional reporter by Samira Hussain, North America business correspondent.