Nvidia loses $450 billion as CEO Jensen Huang faces board probe

Nvidia shares lost approximately $450 billion in value over two trading days, marking a 10% decline. The drop followed news that the company’s board is investigating CEO Jensen Huang. The probe centers on his personal relationship with Alice Huang, a former executive at Megaspeed. Megaspeed is a Singapore-based data center company that purchases Nvidia chips.

Alice Huang is also suspected of working with China's intelligence agency. This allegation adds complexity to the ongoing inquiries. Lawmakers have joined the board and a separate review in questioning Huang's conduct. The situation mirrors past ousters of CEOs like Ashley Buchanan of Kohl's and a former McDonald's leader. However, analysts argue Huang's role is more central to Nvidia's identity than those predecessors were to their firms.

Investors view Huang as essential to the company's success, comparable to Elon Musk at SpaceX or Steve Jobs at Apple. Dan Ives, a tech analyst at Yorkville, estimated in a research note that removing Huang could cut Nvidia's valuation by 30%. He noted that most investors currently expect him to remain in his post. Ives stated that the company would change dramatically without him, creating a negative ripple effect across the tech industry and the AI sector.

Shiva Rajgopal, a professor at Columbia Business School, described the situation as exposing how dependent the company is on one individual. He compared the stakes to what would happen to Tesla and SpaceX if something occurred to Elon Musk. Rajgopal suggested that while a board chair might not dismiss Huang due to Nvidia's strategic importance in AI, the board should demonstrate independence. He recommended hiring a law firm to assist the investigation and immediately developing a succession plan.

Nvidia's code of conduct states that personal relationships can create conflicts of interest. The policy instructs employees to ask if they can defend an action if it becomes public. If not, the code advises them not to proceed. Jay Aldebert, chief growth officer at International Services, called Huang's conduct a definite violation. He noted that how the company handled the situation based on its own rules will be a key issue for stakeholders.

Huang addressed his employees via message on Sunday. He admitted to being unfaithful to his wife and apologized for hurting her and their two children. Both of his children also work at Nvidia. He wrote that there is no excuse for his actions and that he is deeply sorry. Nvidia did not immediately respond to a request for comment on whether Huang violated specific company rules.

The board consists of 11 members, including Huang. The other members are considered independent according to regulatory filings. They include John Dabiri, a professor at the California Institute of Technology, and Melissa Lora, a former Taco Bell International president. David Yoffie, a professor at Harvard Business School, said the board is between a rock and a hard spot. He noted that if Huang must be removed and there are no clear successors, it presents a terrible outcome.

Huang has more than 60 direct reports, placing him at the center of decision-making. Potential replacements mentioned include co-founder Chris Malachowsky and Chief Financial Officer Colette Kress. Bob O'Donnell, an analyst at TECHnalysis Research, said Nvidia employs more than 40,000 people with many other great leaders. He urged the company to let these other leaders emerge as spokespeople to build trust, though he does not expect Huang to leave his post.