On Wednesday evening, an alert from news shook up the stock of the world's most significant artificial intelligence chipmaker. At night, the founder of Nvidia was allegedly looking at the end of his 33 years long reign.
The board of Nvidia is planning to fire CEO Jensen Huang due to having affairs outside marriage, two of which were apparently with a Chinese spy, according to the Wall Street Journal on Wednesday.
The report is based on anonymous sources. The board did not make any decision yet and the company refused to comment on it, as both reports could not be verified independently.
The board had already scheduled to have their meeting at the earliest by Wednesday in order to decide the fate of Huang. The reports analyzed above did not indicate whether the meeting was held or the decisions reached.
The new allegation involves another affair. It is in connection with the New York Times report of his affairs with an Nvidia executive. The executive works as the vice president in the organization as per the Times reports. She is not named here because there are no allegations against her.
This scandal broke out days ago. The company's founder and CEO, Huang, wrote on Sunday an email to the employees revealing that he was cheating on his wife. Nvidia stated that its board of directors had initiated an independent investigation "given the recent reporting that founder and CEO Jensen Huang is the target of a foreign intelligence operation."
At the time, the company's board of directors expressed their trust in Huang and his management team. This is the very trust which the new report questions.
Investors didn't waste any time. Shares of Nvidia fell around 8% in after-market trading, and considering this fall, the company's market value has fallen by nearly $600 billion since the time its board of directors made its investigation public.
Numbers varied from report to report. While one report suggested a decline of 7.4% to $160.95, another one cited a 5% fall. Numbers during after-hours trading can fluctuate a lot, and the next morning we'll know the actual number.
An abrupt departure will be uniquely difficult for Nvidia. The company was co-founded by Huang in 1993 and he has been heading it ever since. According to Gil Luria of D.A. Davidson, it will not be easy to remove him right away as there is no clear plan of succession.
Analysts at Baird said a replacement is getting increasingly probable and that they prefer an external candidate. As per Fortune, the board will be considering an interim chief executive, and one of the possible candidates is lead independent director Stephen Neal.
There are also different views about the price tag. Dan Ives of Wedbush believes that Nvidia will be 25-30% less valuable without Huang. This is the prediction of only one analyst and is not something that the company predicts.
National security has been another concern raised by the board. It claims that there is no proof that the company’s secrets or its national security were compromised. Huang will remain as head of the company while the investigation is being conducted.
None of the reports covered in this essay indicate whether that was true, or even whether the investigation has come to an end.
Pressure from the political sphere is increasing. Huang may receive a subpoena from Congress if he fails to give an in-chamber brief on his request. Rep. Mast indicated that he is ready to subpoena him.
A number of representatives in Congress demanded Huang’s resignation, while Sen. Kevin Cramer repeated his request on Wednesday. US President Donald Trump claimed that Huang was unaware that the woman was a spy.
China has denied these accusations. Beijing dismissed the accusations as being "baseless and purely slanders against China."
There are three issues which need to be distinguished. First, Huang has been found to have been unfaithful to his wife. The accusations of espionage against Huang are allegations made by U.S. officials and media. As for the board investigation, no information about its findings was found in the reports examined. The second relationship is only reported, but not confirmed by Huang or the company.
Another issue can be raised internally in case the relationship concerned one of the employees reporting to Huang. No findings were found in the reports examined.
