Jensen Huang scandal leaves Nvidia leadership in question as $352b wiped from AI giant’s share price
The scandal surrounding Nvidia chief executive Jensen Huang led to billions being wiped off the company’s value, adding to investor concerns over the AI giant’s future.
Shares in AI bellwether Nvidia slumped on Monday as investors said its chief executive and talisman Jensen Huang could be forced out of the business he founded in 1993, due to his affair with a suspected Chinese spy.
The sell-off saw around $US220 billion ($352 billion) wiped off Nvidia’s market value, after the $4.4 trillion tech giant’s board promised an investigation into the allegations.
“I doubt Jensen Huang will be able to remain as Nvidia CEO,” said Gary Black the managing partner of The Future Fund.
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By continuing you agree to our Terms and Privacy Policy.“He has no natural successor within the company. While Huang has not committed any crime or tort, his code of conduct and judgement will be called into question which will likely result in his removal by the Nvidia Board.”
Mr Huang sensationally confessed to the love affair with an alleged Chinese spy named Alice Huang in an email to all staff on Sunday, but denied his actions had endangered US national security.
The board investigation cast uncertainty over the future of the most influential figure in AI, whose control over the supply of advanced semiconductors has put him at the centre of the technology rivalry between the US and China.
AI is essential to military and defence including drone warfare, with advanced computer chips used in missiles and tanks since the 1970s.
It’s also essential to cybersecurity, given its potential to unleash crippling attacks on internet networks.
The tech’s rapid advance has prompted national security officials in Washington to push for tighter restrictions on exports of Nvidia’s most advanced chips to China.
Mr Huang’s regular advocacy for looser export restrictions leaves him vulnerable, amid the allegations his lover had ties to Chinese intelligence agencies.
“Huang can no longer say a single word in defence of the Chinese market before Congress or the White House,” said Andrew Lu, the managing director at Sinolink Securities.
“If he does, he will be branded as someone who fell for an intelligence operation and still hasn’t come to his senses.”
Honey trap
At a minimum Mr Huang’s affair leaves him and Nvidia on a very short leash with powerful US national security interests as the firm’s board is pressured into its investigation.
“Huang made the fatal mistake of letting his guard down in his private life and personal relationships. In the end he fell into a honey trap, the textbook tactic of intelligence warfare, and was compromised,” said Mr Lu, who formerly worked as head of semiconductor research at Barclays Bank.
The analyst even suggested America’s national security agencies exploited the weakness in Mr Huang’s private life to gain leverage over him and his company.
China’s Foreign Ministry spokesperson Guo Jiakun said the spy narrative is unsubstantiated.
Whatever the truth, Mr Huang has admitted to the affair, but stringently denies any suggestion his love life endangered US national security.
Nvidia’s board also said it supported Mr Huang ahead of its investigation.
“The (Nvidia) board prioritises US national and economic security, which is paramount to the interests of Nvidia and its shareholders,” it said in a statement on Sunday.
“While the Board has no reason to believe that either national security or Nvidia secrets were compromised, the Board’s inquiry will examine all available information.”
Other professional investors including, Dan Ives, the founder of Wedbush Securities, have dismissed talk Mr Huang will be forced to leave the AI pioneer.
Nvidia shares have already fallen nearly 20 per cent over the past six months as rumours about Huang’s affair circulated alongside concerns about increasing competition in the semiconductor industry.
“While I don’t see long-term value impairment, many portfolio managers will reduce their Nvidia holdings in the coming weeks as a result of uncertainty over who could succeed Jensen,” Mr Black said.
Nvidia as the symbol of AI’s revolutionary potential is a favoured holding among many Australian superannuation giants; including AustralianSuper, Aware Super, Australian Retirement Trust and Care Super.
Mr Huang’s troubles leave them all exposed to one of the wildest stories to emerge across the AI frontier.
