Nvidia faces $470 billion two-day wipeout, $1.7 trillion in market cap erased amid honeypot scandal

The company has lost a total of $1.8 trillion, or 32% of its share price across the 24-trading-day sell-off, which predated the fallout of the Huang affair.

Nvidia shares extended losses on Tuesday, putting the chip giant on track to shed more than $470 billion in market value over two sessions as concerns mounted over the fallout from CEO Jensen Huang's affair with a Chinese businesswoman alleged to be a spy for Beijing.

The CEO's relationship with Alice Huang helped facilitate shipments of at least $7.5 billion worth of Nvidia chips to Chinese firms, The Information reported on Tuesday, citing two people who know her. Alice Huang and Jensen Huang are not related.

Nvidia's board launched an internal investigation on Sunday, and its independent directors on Tuesday said they had retained former acting US Attorney Joon Kim and law firm Wachtell, Lipton, Rosen & Katz to lead the company's investigation.

The FBI is separately examining whether the 63-year-old Huang was targeted by a foreign intelligence operation. Huang has told employees he was unfaithful to his wife but provided no details about the relationship.

The allegations have intensified scrutiny of Nvidia's governance, export-control compliance and reliance on Huang's leadership, adding to investor unease over whether massive spending on artificial intelligence infrastructure will deliver adequate returns.

Trillions lost in massive share price collapse

Nvidia's shares fell more than 6% following a 4.3% drop on Monday, allowing Microsoft to briefly overtake the AI bellwether as the world's second-most valuable company for the first time since June 2025.

The company has lost a total of $1.8 trillion, or 32% of its share price across the 24-trading-day sell-off, which predated the fallout of the Huang affair.

Nvidia hit a record high close of around $243/share ($5.78 trillion market cap) in early October 2026. The stock experienced a gradual pullback of about 20% driven by broader market dynamics.

Then, the honeypot scandal broke, and the sell-off accelerated.

Is this the start of an AI-bubble pop?

"The investment debate is whether this remains company-specific or triggers restrictions and disruption across AI infrastructure," Bank of America analysts wrote in a note. "We would not equate allegations with proven business damage."

Alice Huang, also known as Huang Le, along with her husband and sister, built a network of companies across China and Singapore to acquire Nvidia chips, The Information reported.

At the center of the network was Shanghai Century Litong, a China-based company that secured preferred cloud partner status with Nvidia in 2023, giving it priority access to the company's chips, the report said.

When orders for Nvidia chips subject to US export restrictions stalled, Alice Huang used ties to Nvidia and its distributors to secure supplies, helping move about 240,000 H100, H200 and some A100 chips into China, according to the report.

Century Litong rented computing capacity and operated data centers using Nvidia chips, including some barred from sale to China. Some of the chips ultimately served Alibaba, Tencent and smaller Chinese AI labs, The Information reported.

Alice Huang also held an executive position at Singapore-registered Megaspeed, which was linked to Century Litong and has been investigated by US authorities over Nvidia chip shipments from Southeast Asia to China, the report said.

The Information reported that Alice Huang leveraged her relationship with Jensen Huang to bolster her credibility while keeping her role vague and avoiding a paper trail.

Nvidia did not immediately respond to a Reuters request for comment. Alibaba, Tencent, Megaspeed and Shanghai Century Litong were not immediately available for comment outside regular business hours. Reuters could not independently verify the report.