Board inquiry raises succession and shareholder questions
President Donald Trump said Monday that the FBI was investigating Huang’s reported affair with an alleged Chinese government agent. Trump said he spoke with Huang and believed Huang “had absolutely no idea that the person in question was a spy.” Nvidia’s shares dropped more than 4% Monday and continued sinking Tuesday morning as law enforcement, members of Congress, Nvidia’s board and shareholders asked questions about the alleged foreign intelligence effort.
In a statement announcing its inquiry, Nvidia’s board said it had no reason to believe national security or company secrets were compromised. The board also expressed confidence in Huang.
The investigations reached a company that became one of the world’s most valuable by providing technology that powered the artificial intelligence boom. Nvidia’s valuation was more than $4 trillion, giving it outsized importance on Wall Street and as a provider of chips relied upon by AI developers. The company employed more than 40,000 people worldwide.
Huang co-founded Nvidia more than 30 years ago and has led it for 33 years. He has more than 60 direct reports within a corporate structure that keeps him at the center of decision-making. The plan to replace him remained unclear as the investigations continued.
David Yoffie, a professor at Harvard Business School, said, “The Nvidia board is between a rock and a hard spot. They have almost no good options. Jensen is Nvidia.” He added: “And if he has done something wrong and he needs to be removed and they have no successors, that’s a terrible outcome.”
If Huang resigns or is removed by the board, speculation about possible replacements has turned to Nvidia co-founder Chris Malachowsky, a senior technology executive at the company, and Chief Financial Officer Colette Kress.
Bob O’Donnell, president, founder and chief analyst at TECHnalysis Research, said Nvidia has “lots of other great leaders” within it. “I think it’s important that the company starts to let some of these other folks come out as spokespeople so people feel trust, they feel good about Nvidia and their future, even without Jensen,” O’Donnell said, although he did not think Huang would leave his post.
Jeffrey Sonnenfeld, a professor of leadership at the Yale School of Management, compared Huang’s relationship with Nvidia to Steve Jobs’ role at Apple. Sonnenfeld pointed to Huang’s signature leather jacket, like Jobs’ turtleneck, and said Nvidia was “symbolically and substantively, inextricably intertwined around his personal aura.”
Other technology executives, including Oracle’s Larry Ellison and Microsoft’s Bill Gates, have also been deeply intertwined with their companies’ success. Dan Morgan, vice president and senior portfolio manager at investment firm Synovus Trust, said those companies “can still be successful long after the original founders have taken on a lesser role.”
During his 33-year tenure, Huang built a reputation as a trusted business leader and an established voice in the technology industry. He cultivated close relationships with other technology executives and with Trump, helping persuade the president to take a lighter touch on regulating AI. O’Donnell said, “Everybody wanted to have that Midas touch of his when it comes to technology.”
For Nvidia and Huang, the scrutiny comes at a delicate time for the AI industry following the midterm elections in the United States, which ushered in a wave of Democrats promising tougher regulation. Sen. Mark Warner and Rep. Hakeem Jeffries said Monday they were interested in investigating further.
A shareholder sued Nvidia and Huang on Monday in federal court in California, accusing them of deceiving investors in their responses to media reports about Huang’s affair with the purported Chinese spy. The complaint says the company misled investors about Huang’s relationship with Alice Huang and the national security implications. The New York Times identified Alice Huang as a business executive and Chinese citizen; news reports said she was suspected of working for Chinese intelligence.
Sonnenfeld estimated that Huang had roughly even odds of remaining CEO, but said the odds were “slipping by the moment.” He said Huang “has lost the confidence and trust of his key constituents, his board, his employees” and added that every employee knows “if anybody else had done this, they would have been fired long ago.”
Morgan expressed more confidence in Nvidia’s institutional stability. If Huang were required to step down to a lesser role following the company’s investigation, Morgan said he was “still confident that the company will continue to maintain its lead in the GPU AI chip market.” He also said the affair “sounds more like a made-for-TV melodrama than a real story.”