Nvidia CEO Jensen Huang’s Downfall Benefits China in the AI Race
How valuable is a CEO? Often, it’s hard to say. Sometimes, though, a series of unusual events provides a crystal-clear answer.
On Wednesday afternoon, the New York Times reported that Nvidia CEO Jensen Huang had an affair with a subordinate, following revelations earlier this week that he had a romantic relationship with a possible Chinese spy.
Right after that, The Wall Street Journal reported that Nvidia’s board was preparing to oust Huang.
That one-two punch knocked Nvidia shares down about 8% in after-hours trading, wiping more than $300 billion off the company’s market value.
The Chinese spy allegations were already known days ago. The new news today is that Jensen Huang is likely to be ousted as CEO.
So we have our answer: Huang is worth at least $300 billion. That’s more than Morgan Stanley and Goldman Sachs, the world’s most important investment banks.
And quite right, too. Huang is “the architect of the US AI trajectory,” Stacy Rasgon, a top chip analyst from Bernstein Research, wrote in a note to investors earlier this week.
This is the most powerful new technology to emerge since the dawn of the internet 30 years ago. And the US is in the lead — well ahead of China in second place.
Now, with Huang likely out, and no obvious successor, America’s AI lead looks shakier.
“We can’t even begin to speculate as to who they might find to fill Jensen’s shoes,” Rasgon wrote in a note to investors Wednesday evening. He slashed Nvidia’s price target to $200 from $400.
Earlier in the week, Rasgon warned of the geopolitical risks if Huang was forced to step down.
“The primary beneficiary of Jensen’s removal as Nvidia’s CEO would clearly be China; we hope cooler heads prevail,” he wrote.
On Wednesday night, other analysts shared similar concerns.
“This would be a setback for the US, particularly as China continues aggressively investing in its own AI capabilities,” Brad Gastwirth, global head of research at Circular Technology, told me.
“Removing Jensen would be a tremendous mistake,” he added. “Nvidia is central to America’s AI leadership, and losing Jensen at this stage could create unnecessary disruption.”
Nvidia’s board has serious questions to answer about Huang’s conduct, especially his relationship with a possible Chinese spy. If they do nothing, the directors expose themselves to legal risk as representatives of the company’s shareholders.
One of the few real powers a public company board holds is the ability to hire and fire executives, so actions often involve tough decisions like this.
But the board also has to weigh the enormous cost of losing the man who built Nvidia into the engine of the AI boom.
Tonight, that cost is at least $300 billion.
“The board obviously needs to take the allegations seriously, particularly anything involving national security,” Gastwirth said. “Unless the investigation uncovers something that makes his position untenable, I believe the board would be making a major strategic mistake by removing him.”
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