H alf the tech world made up its mind before the facts could be assessed properly. Jensen Huang was “irreplaceable”, said the chorus at the start of this week. Nvidia would melt without the co-founder’s brilliance, apparently. The chipmaker’s board had to find a way to save its genius for the sake of corporate America and the entire AI universe.
It was always nonsense because, after the passage of only a few days since his confession of infidelity, Huang looked less like a towering corporate titan and more like a political liability.
An extramarital affair is not usually a resigning matter in itself – saintliness is not an absolute requirement of the job. But the circumstances here were different. A relationship with the Chinese boss of a Singapore-based firm suspected of smuggling Nvidia chips into China? That displayed recklessness on top of mere unfaithfulness.
Did he know the Megaspeed executive, Alice Huang (no relation), was regarded as a Chinese spy by US officials? It hardly matters. In the ultra-political world of in-demand AI computer chips, there were enough reasons for him to be careful in the extreme. The conflict of interest, and the risk of landing Nvidia in a quagmire of national security inquiries in Washington, would have been obvious.
Reports of a second affair with a senior Nvidia employee compounded matters – US companies tend to be sensitive about such relationships. But the company’s directors might also have wondered what else could be revealed in coming weeks. Rule number one in these situations is to get all the bad news out on day one.
The kneejerk reaction to Jensen Huang’s resignation was 13% off the share price. That was understandable – some investors truly believed the “irreplaceable” thesis. However, sitting in Nvidia’s boardroom, the job was not to worry about the initial stock market response but about what was best for the business. For multiple reasons, it was time to “rip off the Band-Aid and take Nvidia into its next chapter”, as Dan Ives, a senior tech analyst, put it.
First, the congressional investigations will happen anyway. Democratic senators have asked administration officials to preserve all documents and communications related to the sale of Nvidia’s advanced AI chips to China. At heart, that issue is wider than Nvidia – it’s about whether US officials have themselves jeopardised the country’s lead over China in AI. But, one way or another, the company’s activities, and ties to the Trump administration , will come under scrutiny like never before. Nvidia is better placed to defend itself without Huang in the top job.
Second, his personal lobbying clout on export policy had evaporated. After this week’s revelations, he had no credibility as an advocate of looser restrictions. The political demand will be entirely in the other direction – for loopholes to be closed.
Third, there is the issue Nvidia’s underpowered board has dodged for too long: over-reliance on one individual. Never mind the risk of scandal, there is always a danger in concentrating too much day-to-day power in the hands of one individual. Nobody doubts Huang’s commercial talents, but even “godfathers of AI” in leather jackets don’t go on forever. Better to have a setup that can cope with change at the top.
Colette Kress, the chief financial officer who will stand in as chief executive, is well regarded on Wall Street. Nvidia will not be short of outside applicants on a permanent basis. And the board has heard the governance criticism that a multitrillion-dollar company ought to have an independent chair: Harvey Jones, a former chief executive at semiconductor company Synopsys and a member of the current crew of directors, has got the gig. Then comes the task of creating some proper governance checks and balances, which may require fresh faces among the independent directors.
Within a couple of hours, the fall in the share price had narrowed to 5% as investors remembered that Nvidia still has the best, and most in-demand, graphics processing units in the world and that many pioneering companies have prospered after the exit of an “irreplaceable” chief executive.
Nobody pretends the management job will be easy. Nvidia will be different, not least because the political winds in the US have shifted. But there was no point trying to cling to a chief executive, however successful, who had made himself a busted flush. Huang had to go.
