Nasdaq defies Nvidia impact as Huang faces espionage affair probe

Hello, this is Leonie Kidd with today’s edition of Morning Squawk.

Trouble had been brewing, but over the weekend the story broke that Nvidia CEO Jensen Huang – the so-called ‘torchbearer of AI’ – has been having an affair with a woman that U.S. intelligence believes to be a Chinese spy. 

The news has sent shockwaves through the markets, with investors scrambling to assess the potential fallout for the AI industry more broadly.

Nvidia CEO Jensen Huang has issued an apology to his family, the company and investors after admitting to an affair with a woman who is alleged to be a Chinese spy. 

The stock is under heavy selling pressure in premarket trading, currently down over 5%  and lower by over 6% in Frankfurt. 

What we know so far: 

• Jensen Huang has admitted to an extramarital affair. 
• U.S. intelligence services have reportedly expressed concern that the woman, Alice Huang, has been passing information to Beijing. 
• Alice Huang works for Megaspeed, a Singapore-based cloud company that is an Nvidia customer. 
• Megaspeed has been accused of helping restricted Chinese companies acquire AI chips. 
• The Board of Nvidia has opened an investigation into the allegations.
• China’s Foreign Ministry has said the “so-called Chinese spy narrative is completely unsubstantiated.”  
• President Donald Trump reacted to the news, saying, “I think he’s an honorable guy. I think he probably has an excuse for it.”
• For the email that Jensen Huang sent to staff, as well as the statement from Nvidia, you can read it all here. 

Analysts are struggling to assess the impact. Yorkville Ives and co Partner, Dan Ives, called this a “black-eye moment for Jensen,” that will create an overhang for the stock. Ben Emons from Fed Watch Advisors highlighted the “key-person” risk at Nvidia. He added that in the event Jensen Huang did take leave or step down, Nvidia could turn to the following people to step up: 

• Colette Kress, CFO
• Ian Buck, VP and GM of Hyperscale
• Bryan Catanzaro, VP Applied Deep Learning
• Jay Puri, EVP Worldwide Field Operations
• Debora Shoquist, EVP Operations

Nvidia’s move is keeping Nasdaq futures under pressure, with the index dipping in and out of the red this morning. The Dow and S&P futures are holding just above the flatline.

• Coming up: We get more views throughout the day, from guests including Former Rep. Kevin McCarthy (R-CA), Sen. Marsha Blackburn (R-TN) and Antony Blinken, former Secretary of State, all appearing on “Squawk Box.” 

Nvidia is dragging down certain parts of the market in early trading, with Intel, Micron and Qualcomm also in the red.

However, Broadcom and AMD are higher.

It was a strong session for some of Asia’s biggest chip stocks, with TSMC, Samsung and SK Hynix all trading higher despite the scrutiny around Nvidia. 

• CNBC sources: CNBC’s Seema Mody spoke to an Nvidia investor close to Jensen Huang, who said he could take a leave of absence if the investigation interferes with his ability to lead. But the source said unless there is more to the story, he doesn’t expect Huang to leave or get ousted. 
• Analysts’ view: Bernstein says “Nvidia is not an ordinary company and Jensen is not an ordinary CEO,” adding the “overhang will be around for a while.”
• Cramer’s View: Our Investing Club members can get Jim Cramer’s instant reaction to the news and what it means for the stock here. 

Berkshire Hathaway has doubled its share buybacks in the third quarter, repurchasing around $9.6 bn of its stock.  

The move came as the group posted a 5.8% drop in operating earnings, as insurance underwriting and investment income fell. 

• Why it matters: Berkshire shares have outperformed, benefitting from the rotation out of technology stocks. The stock is up 13% on the year, outstripping the S&P’s 7.8%. 
• Hold the look: Greg Abel’s group kept its five largest equity holdings the same across some of the biggest tech, consumer and banking names. 

CNBC’s Leslie Picker will report live from Goldman Sachs’ Alternative Investment Conference and speak exclusively to CEO David Solomon.

• Why it matters: Solomon recently questioned the broad impact of frontier models, citing their importance to particular sectors like cybersecurity and defense, while remaining more skeptical of their wider adoption.  
• Succession planning: Goldman has recently talked down reports of deputy John Waldron being prepped to succeed Solomon as early as next year, saying “there is no timeline” for a leadership change. 

A wave of threats is testing Europe’s defenses

Cyberattacks, bomb threats against passenger flights, civil unrest and suspected acts of sabotage across Europe have raised questions about the continent’s resilience — and how prepared it is to defend itself against modern security threats.

Hackers remotely manipulated refrigeration systems at supermarkets across Europe last week, forcing retailers to discard spoiled food and exposing vulnerabilities in everyday infrastructure.

— CNBC’s Jason Gewirtz, Fred Imbert, Jim Cramer, Terri Cullen, Lim Hui Jie, April Roach and Elsa Ohlen contributed to this report.

John Melloy edited this edition.