New Delhi: Jensen Huang announced his resignation as Nvidia’s CEO on Thursday following a spate of news reports alleging he had two extramarital affairs, one with a woman charged with spying for China. Board members will hold a search for a permanent replacement for their new chief executive officer, chief financial officer Colette Kress, who will also be given the authority to manage the company on an interim basis. The allegations of spying have been denied by Beijing.
The decision-maker problem
Huang was more than a figurehead. When the question arose over the last few times, he was evasive, meaning Nvidia didn’t develop a noticeable bench. Over the last 30 years, he determined the direction of the product, selected partners and defined the relationship with the largest AI customers. That sort of power is not easily delegated, even to a respected chief. The board hopes to maintain business as usual, customer commitments and the product roadmap. Big and quick decisions will be monitored by investors for any hesitation.
Kress’s two jobs
Kress has worked for a number of companies in finance roles, including Cisco and Microsoft, until joining Nvidia in 2013, where he took on the job as finance chief. She has a better knowledge of the numbers than most people. Her description in the announcement includes both roles as she is currently also Executive Vice President and CFO, and will assume the interim CEO duties. Being the CEO of a small business in a national emergency, defending a lawsuit and looking for a new CEO is a burden. The ‘interim’ status also doesn’t give her the freedom to brag.
The $600 billion question
The market had responded swiftly. Investors in the United States bought up 10% fewer shares in premarket trading on the continent and that loss has erased approximately $600 billion. In early October, the stock had reached its all-time high at around 25 percent above the current level. Part of that loss is due to the scandal, part may be a general loss of faith in the AI boom. It will be difficult for analysts to sort out the two. The extent of Huang’s worth to Nvidia over its chips is still to be determined.
November 17: the first test
Nvidia has revealed that it will release its projected profits on 17 November. The numbers will count, but the tone will count too. Kress will certainly be part of the call along with investors who will be taking notes on the demand, supply and transition. The smooth and confident execution can bring stability to the stock. Either a cautious or unclear one might exacerbate the sell-off. The earnings call also comes at a time of legal challenges: Investors have filed a class action lawsuit against Huang and the company for the lack of information regarding the connection to the investors.
The China dimension
The spying accusation adds substance to its narrative beyond the one company. It is thought that in the spring of this year, US intelligence shared a memo stating that one of the individuals involved was an asset for China’s Ministry of State Security. Nvidia’s chips are the hub of the U.S.-China tech battle, and Taiwan’s TSMC has the lead in manufacturing Nvidia’s processors. It is not clear that Washington’s policy toward export controls will change due to Huang’s departure. The bill could result in greater oversight of Nvidia’s partnerships, and the new leadership at Nvidia could be hesitant to pursue Asia partnerships. These are potential results, not actual results, and the allegations have yet to be substantiated.
A more powerful chairman
There was another change of structure too. It named a former chief executive of chip design software maker Synopsys, Mr. Harvey Jones as its first-ever ‘chair’. The board has absolute confidence in Colette as well as the leadership team,” Jones said. The chair position, or “in the interim” CEO position could have an unusual sway since the founder has departed and the CEO is given an interim status. Jones is likely to be the one leading the way in the search for the next CEO and could also determine the level of independence that Kress will receive. That could make as much of a difference as anything they are releasing for the market as it could for Nvidia to remain divided or remain stable.
What comes next
Nvidia is one of the most necessary businesses in the AI field and its technology is not reliant on any single person. Yet a scandal, a founder’s departure, an eroding stock price and an interim leader is a major challenge to a company’s maturity. It will be up to the next few weeks and months to see whether Nvidia was designed to survive Huang.
