Nvidia shares got hit hard after new cheating allegations against CEO Jensen Huang, a mess that's bad for shareholders and raises real questions about who runs the world's most valuable AI chip company.

Reports claim Huang had a relationship with Kimberly Powell, a 48-year-old vice president who has reported directly to him for years. A bystander allegedly filmed the two together and was pressured into signing a non-disclosure agreement by Huang's security team, though no footage has surfaced publicly yet.

The Nvidia board is reportedly working with outside lawyers to investigate and is discussing whether to replace Huang, possibly with an interim CEO first. Huang's daughter, who also works at the company, has been floated as a possible successor, which would keep him influencing things from behind the scenes.

A class action lawsuit was already filed this week over separate claims of damage to Nvidia's stock, and this new scandal is likely to add fuel to it. Nvidia stock dropped sharply, wiping out over $300 billion in market value in a single day.

Outlook: Expect more pressure on the board to make a leadership decision soon, with Nvidia's stock likely to stay volatile until the investigation and lawsuit play out.