Nvidia launched an investigation into a possible Chinese intelligence operation against Huang. Its shares are down 5%.
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Nvidia shares are down nearly 5% today after CEO Jensen Huang admitted to an extramarital affair and announced an independent investigation. The board and outside lawyers will review reports of a possible attempt by foreign intelligence to gain access to Huang through his relationship with his daughter Alice Huang, the former executive of Singapore-based Mega Speed International, a major buyer of the chip maker.
Jensen Huang apologized to his family and colleagues and promised to cooperate with the investigation. In an official statement, Nvidia's board expressed confidence in Huang and his team, stressing that there is currently no reason to believe that the company's confidential information has been exposed or that US national security has been compromised. Donald Trump also stood for it. The US president called Huang a "decent man", praised his work and said he should remain in office.
What does all this mean for investors?
Nvidia is very dependent on its founder. Huang has led the company since its inception in 1993 and has personally determined its long-term strategy. Bernstein analyst Stacey Rasguna estimates there are about 60 managers who report directly to the CEO. This structure allows Nvidia to make decisions quickly, but increases the risks if Huang leaves. Moreover, the company has no public succession plan and a clear candidate to replace it, notes the head of the Futurum Group, Daniel Newman.
Huang's role extends beyond Nvidia. Nvidia not only provides accelerators for training and running models, but also invests billions of dollars in artificial intelligence developers, cloud operators and hardware suppliers, which serves as one of the main companions of the entire artificial intelligence boom.