Analysts say Nvidia CEO unlikely to be ousted over affair, but raise questions about company's future

Wall Street analysts are reacting to news of Nvidia ( NVDA ) CEO Jensen Huang's affair with a woman alleged to be a Chinese spy with a mixture of caution and concern about the company's future and what the episode means for the AI industry.

Nvidia stock fell in early trading Monday.

In an email to Nvidia employees , Jensen Huang admitted to the affair and apologized to his family. The company's board has launched an independent investigation into the matter, but noted that it has "no reason to believe that either national security or Nvidia secrets were compromised."

The woman, Alice Huang, was an executive at Singapore data center company MegaSpeed, which has been the subject of investigations into whether it smuggled Nvidia chips into China.

One of the company's co-founders, Jensen Huang, is instrumental to the AI boom and closely guides Nvidia's strategy.

Moor Insights & Strategy CEO and chief analyst Patrick Moorhead told Yahoo Finance that he doesn't believe Huang will be pushed out unless the board's investigation turns up anything.

"The issue is that Jensen is the product strategist, the closer with the hyperscalers, and the face of the company in Washington and Beijing. This story puts that last role at risk," Moorehead said.

Wedbush analyst Matt Bryson wrote in a note to investors that the board's initial statement reduces the chances that it plans to oust Huang, but said doing so would be a significant negative for the company due to his "hands-on operating style."

But he wrote that the incident could hurt the CEO's credibility.

"Regardless of the outcome of the investigation, however, we necessarily see Jensen losing some of his power/credibility in advocating for AI and Nvidia with US government representatives (whether free trade with foreign entities or how the government regulates AI development)," Bryson wrote.

Mizuho analyst Jordan Klein, meanwhile, wrote in a note following the news that the board investigation will likely overshadow Nvidia's earnings report on Nov. 17.

"A lot of risk associated with Jensen Huang and his status as CEO…cannot be hedged out. He is too important for NVDA and the entire industry. I would assume the investigation finds no serious wrongdoing or anything criminal. Jensen likely remains CEO; nothing changes in the long run," Klein said.

Bernstein analyst Stacy Rasgon pointed out that the incident will increase scrutiny of Nvidia in Washington.

The headlines are "(at the very best) going to be a heavy distraction, and at the worst provide significant ammunition to both sides of the aisle, from China hawks (of which there are many on Capitol Hill) already displeased with the current US stance toward the country, to incoming Democrats unhappy with the close ties to Trump that Jensen has cultivated over the last few years," he wrote in an investor note.