The controversy escalated on several fronts on Tuesday as allegations emerged that Huang's relationship with Alice Huang aided at least $7.5 billion in Nvidia chip shipments to China and that US Secretary of State Marco Rubio had previously briefed President Donald Trump on the affair.

Senate Democratic Leader Chuck Schumer demanded answers from the administration and tighter curbs on chip exports to China, while the company's independent directors hired outside counsel to investigate.

Republican US Senator Kevin Cramer from the Senate Banking Committee called on Huang to step down as CEO.

"The potential for extortion is so tremendous that something as sensitive as Nvidia chips, I just think he's got to go," Cramer said on Tuesday.

Read more: FBI 'looking into' tech boss's affair with Chinese spy, Trump says – as Nvidia takes $200bn hit

Read more: Nvidia shares plunge after boss embroiled in alleged Chinese spy scandal

The allegations have turned Huang's personal conduct into a broader risk for Nvidia, raising questions about the company's governance and its dependence on the CEO who has led it for more than three decades and built it into the dominant supplier of AI chips.

He owns about 3.6% of the company — but does not have majority voting control — and runs an unusually flat organisation in which dozens of executives report directly to him.

The FBI is separately looking into whether 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. China's foreign ministry has said the spy accusations are "groundless."

Huang reportedly apologised to top executives at a closed-door meeting on Monday before pivoting to business and was back holding meetings at Nvidia's headquarters on Tuesday.

Nvidia has come into focus after the Joe Biden administration sought to slow down Beijing's development of AI by putting limits on semiconductor exports.

It has come as a major blow to Nvidia and tarnished Mr Huang’s tenure as boss of the Silicon Valley tech giant, whose shares hit an all-time high last month on its AI successes, making it one of the world’s most valuable publicly traded companies, alongside Apple and Microsoft.

Nvidia chips power many of the data centres and systems used to train and run AI models, but its sales of computer chips to China have at times been targeted by US regulators seeking to limit Beijing’s access to such technology.

Market experts said the scandal could lead to a further rout in the US tech sector and lead to fears over the AI bubble.

Neil Wilson, Saxo UK investor strategist, said: “Nvidia is huge and at the heart of the AI supply chain, so what happens to this stock matters to the rest of the market.

“There is the potential for this story to knock sentiment, which is already pretty fragile.”