Flash Heard: Why Nvidia's Internal Investigation Might not Reveal Much

Dow Jones
4 hours ago

Even if Nvidia's self-directed investigation gets to the bottom of the Jensen Huang scandal, investors might not get much new information about it from the company.

Whether Nvidia's investigation uncovers new facts, it may be restricted from telling the public what it knows. U.S. securities rules bar companies from including classified information in their disclosure filings, and much of the subject matter by its nature is classified.

Nvidia's board Sunday said it is "initiating an independent investigation in light of recent reporting" that Huang "has been the target of a foreign intelligence effort." Huang apologized in a message to employees and said he was unfaithful to his wife. The woman at the center of the scandal, Alice Huang (no relation), was once a top executive at Megaspeed International, based in Singapore, and is suspected of working for Chinese intelligence.

One point the board could clear up is why the company initially mischaracterized the CEO's relationship with Huang. Before the weekend's pivot, Jensen Huang and Nvidia said the relationship was normal and not unusual. Now the board needs to explain whether management withheld key facts from its own communications team or knowingly let the company issue inaccurate statements.

So-called independent corporate investigations tend to follow a predictable path. The board forms a committee that hires an outside law firm to investigate. Only rarely are the complete findings disclosed publicly. The law firm is paid by the company itself.

Nvidia didn't say who may lead the probe. In its statement Sunday, the board said "a committee of independent directors, assisted by outside independent counsel, will oversee the investigation."

Even that requires parsing. In its latest proxy, Nvidia identified nine of its 10 board members as independent directors. The only one deemed not independent: Jensen Huang.

Independent investigations aren't the same as transparency.

 

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