BEIJING — China on Monday, November 9, publicly rejected the espionage allegation at the centre of the Nvidia affair, with Foreign Ministry spokesperson Guo Jiakun telling the ministry's regular briefing in Beijing that the so-called 'Chinese spy' allegation involving Nvidia chief executive Jensen Huang is 'purely unsubstantiated and directed at smearing China'. Guo said the ministry had already responded the previous week — 'We responded to that last week,' he said — and he did not address Huang's acknowledged affair itself, only the spying claim.

Source: China Foreign Ministry briefing transcript, via AIStockWire

The denial came on the first trading day since Nvidia's board announced an independent investigation on Sunday. Nvidia shares were down 5.0 percent at $177.32 in premarket trading at 7:49 a.m. ET on Monday, from Friday's close of $186.64, and Dow Jones Newswires put the shares recently 5.4 percent lower in premarket trade. The stock is roughly flat so far this year and sits about 22 percent below its October peak, after semiconductor shares sold off last week as the Democrats' US midterm election victory sharpened anxieties around the artificial-intelligence trade.

Source: Dow Jones Newswires via Morningstar

What Beijing was asked — and what it did not answer

Reporters from AFP and NBC put the Nvidia investigation and Huang's admission to Guo at the briefing. He answered only the spying allegation. Two later questions were about Nvidia's chips themselves: AFP asked about a Reuters report that roughly 600,000 Nvidia AI chips are stored in Hong Kong while Beijing withholds approval for large-scale imports, and Bloomberg asked how China would respond if Washington pushed for tighter technology curbs, including on chips. Guo answered each question separately with the same two sentences: 'China's position on the U.S. export of chips to China is consistent. For anything specific, I'd refer you to competent authorities.' He did not say whether Beijing will approve imports of the chips waiting in Hong Kong.

The allegation itself remains an allegation. The New York Times reported on October 29 that US officials suspected Alice Huang, a former executive at Nvidia customer Megaspeed International, of gathering information for Beijing, and reported on November 6 that a US memo said officials believed China's Ministry of State Security had recruited her; that memo has not been released. Alice Huang, who also goes by Huang Le, is not related to Jensen Huang, The Wall Street Journal reported. US officials concluded last year that she was sharing information with the Chinese government while working with Nvidia to build data centres in Asia, according to the Journal's earlier reporting — a conclusion China denies and no public evidence has been produced to settle.

On Sunday, Nvidia's board said a committee of independent directors, helped by outside counsel, will oversee an investigation into reports that Huang was the target of a foreign intelligence effort, and said it has no reason to believe either Nvidia's secrets or national security were compromised. The board expressed confidence in Huang's leadership. In an email to employees on Sunday, Huang apologised for being unfaithful to his wife; he did not name the woman involved and referred the 'national security concerns raised in news reports' to the board's investigation.

Awaaz Punjab reported the board's move on Sunday, when the investigation was announced. Read: Nvidia board opens independent investigation

Analysts: an overhang on the stock, and more scrutiny of chip sales to China

Analysts said the investigation will, at a minimum, spark congressional inquiries and create an overhang on the stock. Dan Ives and colleagues wrote that the matter 'will add risk to the stock, as he is so important to the Nvidia story and strategy globally', and that Huang will likely continue as chief executive in the near term, though removal remains possible depending on what the board's investigation finds. Jukan Choe of Citrini Research pointed to Huang's outsized influence over the company and its lack of an obvious successor. On the wider contest, the analysts said the affair will increase US scrutiny of the sale of chips to China, already a key battleground in Washington.

What happens next

The board has given no timeline for its investigation. Nvidia reports its fiscal third-quarter results on November 17, and its forecast for that quarter assumes no data-centre compute revenue from China — a reminder that the world's most valuable chipmaker is already planning around the US-China tech contest. According to coverage of Monday's briefing, three US House committee chairmen have asked Huang to give a closed-door briefing on November 18, or to propose another date by November 11. Whether Beijing ever answers the Hong Kong question — approve the roughly 600,000 waiting chips or keep holding them back — is now the other decision to watch.

The Hong Kong stockpile was reported last week, as the chips waited on Beijing's decision. Read: 600,000 Nvidia chips pile up in Hong Kong