Nvidia, the world's most valuable company, is facing the biggest leadership crisis in its history. The chipmaker's board of directors is preparing to remove founder and chief executive Jensen Huang, according to a report by The Wall Street Journal, after Huang admitted to two extramarital affairs — one of them with a woman American intelligence officials suspect of spying for China.
Directors could gather as soon as Wednesday to decide Huang's future, the Journal reported, citing people familiar with the matter. The news sent Nvidia shares tumbling more than 8 percent in after-hours trading on Wednesday, erasing tens of billions of dollars in market value within hours of a strong regular session in which the stock had closed up nearly 3 percent.
Huang, 63, has led Nvidia since founding it in 1993 and turned it into the dominant force in artificial intelligence computing, with a market value above $4 trillion. His admission on Sunday, in a letter to employees, that he had been unfaithful to his wife stunned Silicon Valley and Wall Street alike.
One of the relationships involved Alice Huang, an executive at Megaspeed, a Singapore data firm and Nvidia's largest customer in Southeast Asia. Megaspeed has faced months of United States scrutiny over suspected smuggling of advanced Nvidia chips, according to Bloomberg. The second affair involved an executive who reports directly to Huang, The New York Times reported.
Nvidia's board opened an independent investigation on November 8 and hired the law firm Wachtell, Lipton, Rosen & Katz to examine the espionage allegations, CNBC reported. The board has said it sees no evidence that national security or company secrets were compromised. Huang is expected to keep running the company while the inquiry continues.
The fallout has spread quickly. Wall Street analysts have cut their ratings on the stock — Baird downgraded Nvidia to neutral and slashed its price target to $200 from $500 — and several members of Congress have called on Huang to resign. President Donald Trump defended Huang this week, and the president's approvals of Nvidia chip sales to China now face review from lawmakers.
The timing could hardly be worse for investors. Nvidia is scheduled to report its quarterly results on November 17, a report Wall Street will now watch as a test of whether the artificial intelligence boom can keep powering the stock market while the company's leadership hangs in the balance.
This article is for general information only and is not financial advice.
Sources: The Wall Street Journal, CNBC, Bloomberg, The New York Times, Reuters, Finnhub.
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