Nvidia’s Huang crisis: What a founder’s fall could cost the AI giant

For three decades, Nvidia and Jensen Huang have been almost impossible to separate. This week, the board of the company he co-founded in 1993 met to decide whether to remove him, and investors answered with one of the steepest sell-offs in Nvidia’s history. As of Thursday, the company had announced no decision.

On Sunday, November 8, Nvidia’s board announced an independent investigation into reports that Huang had been the target of a foreign intelligence effort. At the centre is his relationship with Alice Huang (no relation), an executive at Megaspeed, a Singapore-based cloud company. According to The New York Times, U.S. intelligence officials believe she is an asset of China’s Ministry of State Security. Huang admitted to staff that he had been unfaithful to his wife, writing that there was “no excuse” for what he did.

The stakes go beyond private life. Megaspeed reportedly bought about $4.8 billion of Nvidia chips over two years, and both the U.S. and Singapore have previously examined whether it diverted restricted chips to China. Megaspeed denies wrongdoing, Beijing rejects the spy claims, and U.S. intelligence has made no evidence public.

At first the board stood behind its chief. It said it had no reason to believe national security or company secrets had been compromised, expressed confidence in Huang, and hired the law firm Wachtell, Lipton, Rosen & Katz. Then on Wednesday, The New York Times reported a second affair, with Kimberly Powell, Nvidia’s vice-president of health care, and The Wall Street Journal reported that the board was preparing to oust him. Bloomberg added that directors were working with an outside firm to identify replacements.

Nvidia’s shares had already fallen about 9.5 per cent on Monday and Tuesday. After the Journal’s report, they dropped more than 8 per cent to $159.51 in after-hours trading. Reuters estimates the company has lost roughly $600 billion in market value this week alone. Measured from its October 6 record close of about $5.78 trillion, about $1.7 trillion, or 30 per cent, has evaporated.

Because Nvidia makes up roughly 7 per cent of the S&P 500, its trouble quickly becomes the market’s trouble. Nasdaq 100 futures fell about 1 per cent on Thursday. Asian suppliers including TSMC, SK Hynix and Advantest slid, and CoreWeave, a cloud provider Nvidia backs, dropped more than 7 per cent before the opening bell. Rivals moved the other way: AMD rose about 4 per cent and Broadcom about 3 per cent, as traders bet that turmoil at the market leader could open doors for its challengers.

Investor anger has also reached the courts. Shareholders have filed a proposed class action against Nvidia and Huang, claiming they were misled, on behalf of buyers between October 9 and November 8.

Why Huang matters so much

Few chief executives are so bound up with their company’s value. Huang has been Nvidia’s first and only CEO for 33 years. His bet in the 2010s to turn a maker of video-game graphics chips into the engine of artificial intelligence is why Nvidia’s shares rose about 1,250 per cent in the four years after ChatGPT’s launch, and why it became the first company to pass $5 trillion in value.

He also runs the company in an unusually personal way. About 60 executives report directly to him, he owns about 3.6 per cent of the shares, and he has said he does not believe in succession planning. Nvidia’s own annual report warns that it is “highly dependent” on its longtime leaders. His record is not spotless: a 2002 Securities and Exchange Commission investigation forced Nvidia to restate three years of earnings. Still, his standing in Washington, Beijing and across the AI industry would be hard to replace.

What happens if he goes

Analysts are divided. Gil Luria of D.A. Davidson warned that an immediate removal “could be challenging” without a succession plan, and some analysts told CNBC the stock could fall another 20 per cent if Huang leaves. Russell Pillemer of Pengana Capital called Huang the company’s “intellect” and said there is no obvious successor.

Others argue the business is bigger than the man. Nigel Green of deVere Group described the affair as, for now, a personal scandal. Demand for Nvidia’s chips is driven by technology giants’ enormous data-centre spending, not by its chief executive’s private life. Traders have floated internal candidates such as chief financial officer Colette Kress and senior data-centre executive Ian Buck. Whoever takes over would inherit a structure built around one person.

The longer-term risk is political. Nvidia’s growth depends on export licences, U.S.-China relations and trust in Washington. If the espionage allegations harden, the company’s China business and its standing with policymakers could suffer whoever is in charge. Even if the inquiry finds no security breach, the board must still judge whether a relationship with a subordinate executive is compatible with company policy.

The case is unresolved: an affair Huang has admitted, espionage allegations not proven in public, and a board decision not yet announced. For now, markets are pricing in the possibility of a Nvidia without its founder. Whether that proves an overreaction depends on one question: is Nvidia now a company that can run itself, or still one man’s vision? For investors everywhere, including Nigerians exposed to global technology funds, the lesson is old but urgent. Key-person risk is real, even at a company worth trillions of dollars.