Nvidia’s board of directors faces a trillion-dollar dilemma: Can the chipmaker afford to part with its storied co-founder and CEO, now embroiled in multiple investigations into his affair with an alleged Chinese spy?
In recent years, several high-profile CEOs have been ousted after their relationships with employees and customers came under scrutiny, including former McDonald’s CEO Steve Easterbrook and Kohl’s CEO Ashley Buchanan. But none is so closely identified with their companies as Huang. Over more than three decades, he has led Nvidia as it grew into one of the world’s most valuable companies, with many investors viewing him as equally critical to the company’s success as Elon Musk is to SpaceX or Steve Jobs was to Apple.
Huang is facing serious challenges, including an independent inquiry by Nvidia’s board into the affair, a shareholder lawsuit and questions from lawmakers. Heightening the stakes are allegations that Huang had a close relationship with a former female executive at an Nvidia customer who is also suspected of working with China’s intelligence agency.
$450 billion drop
Nvidia shareholders have been spooked by the disclosure, with the company’s shares shedding 10% of their value — or about $450 billion — in the last two trading days alone.
“It exposes how dependent the company is on this one person,” Shiva Rajgopal, a Columbia Business School professor who studies corporate governance, told CBS News.
He added, “This is like asking if something happens to Elon Musk, what happens to Tesla and SpaceX’s valuations? If something happens to Jensen Huang, what happens to Nvidia’s valuation?”
Yorkville Ives tech analyst Dan Ives estimated in a research note that Nvidia could lose as much as 30% of its valuation if Huang is removed from his role, while noting that for now most investors expect the executive to retain his post at the company.
“At the end of the day, there is only one Jensen, and Nvidia will dramatically change as a company if he is no longer CEO, with a major negative ripple impact across the tech industry and AI Revolution,” Ives said.
“Do not proceed”
Corporate governance experts said Huang’s alleged relationship with Alice Huang — a Chinese executive linked to the Singapore-based data center company Megaspeed, which buys AI chips from Nvidia — appears to violate Nvidia’s code of conduct. That policy highlights that personal relationships could create a conflict of interest for Nvidia, while Huang himself specifies in the code of conduct that the company’s workers have a responsibility “to maintain high ethical standards.”
Nvidia’s code also instructs employees to ask themselves whether they could defend an action if it were made public on social media or known to colleagues. If not, the policy states, “do not proceed.”
Nvidia did not immediately respond to a request for comment about whether Huang had violated any company rules. In a message to company employees on Sunday, Huang admitted, “I was unfaithful to my wife,” and he apologized for hurting her and their two children, both of whom also work at Nvidia. “There is no excuse for what I did. I am deeply sorry,” he wrote.
But Huang’s conduct “is definitely a violation,” said Jay Aldebert, chief growth officer at International Services, a consulting firm that advises small and midsize businesses on issues including governance. “How he handled it based on their code of conduct is where you’re going to see continued issues.”
Still, while Huang may have violated company rules, he may be given more leeway than other employees due to his importance to Nvidia, governance experts said.
“This is an outlier — I don’t remember a case like this,” Columbia’s Rajgopal said. “This company is so important to the U.S. in terms of AI, especially with China and other powers. So even if there is a violation of the code of conduct, if I were the chair of the board, I would not dismiss him.”
Nvidia’s 11-person board includes Huang, although the other board members are considered independent, according to a company regulatory filing. They include California Institute of Technology professor John Dabiri and former Taco Bell International president Melissa Lora. All board members except Dabiri have experience in corporate governance, the filing states.
Nvidia board members should demonstrate their independence by hiring a law firm to help with the investigation, and immediately develop a succession plan for Huang, Rajgopal said.
A common issue for Nvidia and other big tech companies led by their founders is that they are often run “like a family affair,” he added.
“These are effectively run like family private companies, but they are mega-cap public companies where most of the capital comes from the public,” Rajgopal said. “There is a duty above and beyond.”
Succession planning
Huang has said he has more than 60 direct reports in a corporate structure that keeps him at the center of decision-making at Nvidia. As various investigations ramp up, the succession plan to replace him remains unclear, heightening pressure on the board, experts said.
“The Nvidia board is between a rock and a hard spot. They have almost no good options — Jensen is Nvidia,” said David Yoffie, a professor at Harvard Business School. “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 on possible replacements has turned to figures including Nvidia co-founder Chris Malachowsky, who is a senior technology executive at the company, and Chief Financial Officer Colette Kress.
Nvidia employs more than 40,000 people worldwide, and there are “lots of other great leaders” within the company, said Bob O’Donnell, president, founder and chief analyst at TECHnalysis Research.
“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 said he does not think Huang will leave his post.
