SANTA CLARA, California. Nvidia’s board of directors is preparing to oust chief executive Jensen Huang, The Wall Street Journal reported, sending the chipmaker’s shares down about 8 percent in after-hours trading and shaking the artificial intelligence trade that Huang himself did more than anyone to build.
The board was planning to meet as soon as Wednesday to determine Huang’s future, people familiar with the matter told the Journal. The board has not publicly announced any decision, and a Nvidia spokesperson has previously said Huang is committed to staying on as chief executive. The New York Times reported earlier on Wednesday that Huang had an extramarital relationship with a Nvidia executive who reports to him.
The crisis began with a different reported relationship. U.S. officials last year concluded that Alice Huang, then a top executive at Singapore-based Megaspeed International, a Nvidia customer building data centers in Asia, was sharing information with the Chinese government, the Journal reported earlier. Huang acknowledged in a letter to staff on Sunday that he had been unfaithful to his wife and apologized for violating their trust. The company’s board said on Sunday that it had no reason to believe either the company’s secrets or national security were compromised, expressed confidence in Huang’s leadership, and set up an inquiry by independent directors with outside counsel. It is that inquiry, and what it has found since, that now sits behind the board’s reported change of course.
Markets moved first and asked questions later. Nvidia’s fall extended a slide that began when the board investigation was announced, at one point putting the company on track to lose more than $200 billion in market value in a single session. Rivals were mixed in after-hours trade: Advanced Micro Devices rose about 4 percent and Broadcom about 2.8 percent, while Intel slipped 2.7 percent and CoreWeave about 5 percent. The shock carried into Asia on Thursday, where Nasdaq futures fell 0.9 percent, Taiwan’s Taiex dropped 2.6 percent, Japan’s Nikkei lost 0.7 percent and South Korea’s Kospi 0.6 percent.
Washington is involved now as well. The chairmen of three House committees wrote to Huang on Monday saying that recent reports raise significant national security concerns about China’s access to sensitive U.S. technology and information, and Huang has been called to testify to Congress. Investigators are examining Megaspeed’s efforts to acquire Nvidia chips in ways that could help China in potential violation of U.S. export restrictions, the Journal reported. China has denied the accusations. Nvidia’s preliminary findings showed no evidence of compromised corporate data or classified federal information, according to earlier reporting of the company’s position.
The succession problem is the board’s deepest difficulty. Huang, 63, co-founded Nvidia in 1993 and is its largest individual shareholder, with about 3.6 percent of the company. He has said he does not believe in succession planning, runs a flat structure with roughly 60 direct reports, and has never publicly identified a successor. Nvidia’s own proxy statement warns that the company is “highly dependent on the services of our longstanding executive team” and that a failure of succession planning could hinder its strategy and long-term success. “If it’s true they really don’t have much of a succession plan, then that’s a problem,” David Larcker, a Stanford professor of corporate governance, told the Journal.
Not everyone is repricing the business itself. Morningstar senior equity analyst Brian Colello said the issues around the chief executive have not affected the firm’s medium-term forecasts of Nvidia’s financials, a sign that analysts are treating this, for now, as a governance crisis at the top of a company whose products remain in extraordinary demand. Whether the board agrees, and whether Huang stays or goes, is expected to be decided within days.
Source: The Wall Street Journal; The Wall Street Journal (Asian markets)
