The CEO of Nvidia (NVDC34), Jensen Huang, is stepping down, depriving the AI sector of its leading figure and casting uncertainty over the future of the chipmaker he transformed into an AI powerhouse.
The Chief Financial Officer, Colette Kress, will assume as interim CEO while Nvidia searches for a permanent successor, the company said on Thursday.
Huang, cofounder of Nvidia and its fourth-largest investor, with a stake of about 3.61%, will also leave the board of directors.
Nvidia’s shares fell more than 10% in premarket trading, weighing on the market as a whole.
The crisis erupted last weekend, after the executive admitted to having had an extramarital relationship with a Chinese businesswoman suspected by U.S. authorities of espionage for Beijing.
The crisis also brought to light a second relationship attributed to Huang and raised questions about the security of the chipmaker.
Read more: Nvidia CEO’s wife could receive US$75 billion in potential divorce settlement
Nvidia opened an independent investigation into the now-former CEO, and the U.S. Department of Justice is examining the operations of a company linked to the businesswoman. The case also reached the United States Congress and sent ripples through financial markets.
Crisis at the Tech Giant
Huang’s resignation deepens a crisis partly created by Nvidia itself, given that there was no clear succession plan for the 63-year-old executive, who had been the company’s sole CEO. One could argue that, more than any other founder in the tech world, Huang built Nvidia around himself and his vision of what it meant to run a company correctly.
Kress, who joined Nvidia 13 years ago after stints at Microsoft Corp. and Cisco Systems Inc., has dedicated her career to financial roles. Although she represented the company at Wall Street events, her public role was limited to Nvidia’s numbers, and most communication with the financial community was conducted by her former boss.
Under Huang’s leadership, Nvidia’s stock skyrocketed more than 700,000% since the company went public in 1999. The company’s market value climbed to well over $5 trillion, placing it among the world’s largest companies. This remarkable growth outstrips any achievement by Steve Jobs at Apple Inc., Bill Gates at Microsoft Corp., or Jeff Bezos at Amazon.com Inc.
The departure of Huang threatens to have far-reaching repercussions beyond Nvidia. He used Nvidia’s financial power to back dozens of large AI companies, including OpenAI and Anthropic PBC. He also invested in and secured funding for cloud computing firms such as CoreWeave Inc., inspiring others to strike similar deals to strengthen the entire AI ecosystem. Wall Street heavyweights, including Michael Burry, famous for the film “The Big Short,” have warned that these circular deals are artificially inflating demand for AI.
“As a student of economic history, I’m not sure there has ever been a man so fundamental to sustaining a large portion of this sector,” said Thomas Ferguson, investor at Blue Bear Capital, about Huang, during his participation at the BNEF Summit in Houston, on Wednesday, before his departure.
Read also: Nvidia loses value greater than all B3-listed companies after CEO controversy
Huang also led high-profile initiatives to promote the global expansion of data centers, traveling extensively to speak at conferences, summits, and other events. Wearing his signature leather jackets, he drew crowds of fans captivated by “Jensanity.”
The executive also drew closer to the U.S. president, Donald Trump, taking part in meetings at the White House about technology, state dinners, and aboard Air Force One. Huang enjoyed far greater access to the president than most corporate leaders. On Monday, Trump praised Huang as “a very honorable man.”
The revelations about the CEO of Nvidia’s extramarital affair with Alice Huang, an executive at Megaspeed, raised serious questions about his judgment. On Wednesday, the New York Times reported that Huang also had a relationship with Kimberly Powell, Nvidia’s vice president of the health division, citing unnamed sources within the company.
Megaspeed, a company derived from a Chinese gaming firm, is one of Nvidia’s largest customers in Southeast Asia and has been under U.S. investigation for months over suspected smuggling of Nvidia’s advanced AI chips to China, according to a Bloomberg report. Both Megaspeed and Nvidia deny any wrongdoing.
The Nvidia board has been working with an external firm to identify potential replacements for Huang, said a person familiar with the matter who asked not to be identified because the information is not public. The directors met remotely on Wednesday to discuss Huang’s future, said people familiar with the matter.
Some high-profile tech executives named by industry sources as potential candidates for Nvidia’s board include Lisa Su, CEO of rival Advanced Micro Devices Inc.; Rene Haas, president of Arm Holdings Plc; and Sanjay Mehrotra, leader of Micron Technology Inc.
“The fundamentals of the business (if not the leadership) remain clearly intact, with numbers continuing to be enormous (and probably still rising),” said Stacy Rasgon, Bernstein analyst, in a note released late Wednesday. “We do not believe the company will face major operational difficulties while it seeks new leadership.”
Read also: Betrayal, espionage and billionaire business: understand the case involving Nvidia’s CEO
U.S. lawmakers demanded that Huang appear before congressional committees and warned they would issue a subpoena if he did not testify. The Nvidia board said on Tuesday it hired Joon H. Kim, a partner at Wachtell, Lipton, Rosen & Katz and a former career federal prosecutor, “to conduct a full and independent investigation.”
Regarding the AI supply chain, “we wonder what will happen to the company’s numerous investments in this sector, as well as the various guarantees and protections in place,” Rasgon said.
Although Rasgon acknowledged that deciding on actions was difficult, he downgraded Nvidia’s rating to “market perform” and cut the price target to $200. “Our gut tells us that we probably haven’t fully tapped the company’s potential yet,” Rasgon said in the note. “We have had enough and prefer to stand back.”
As Nvidia’s CEO, Huang was known for micromanaging, with as many as 60 leaders reporting directly to him. Each employee had to write a list of their five most important tasks and publish it internally. Huang reviewed these lists to ensure everyone understood what to focus on and personally wrote even to lower-level employees, offering advice or redirection.
But inside Nvidia, employees noticed Huang had been less engaged in recent days, according to a person familiar with the matter. This included not replying promptly to his usual emails with the “five top priorities,” the person said, requesting anonymity because the matter is confidential. The Nvidia leader is known for being so operations-focused that he is known to review personally the compensation of each employee.
“My management style is what allowed the company to grow,” he told Emily Chang of Bloomberg News in a recent interview. “I wanted an organization capable of adapting to changes, both by creating changes for itself and for the rest of the sector, and by responding to changes that are coming.”
(with Reuters, Bloomberg and O Globo)
