Chip giant Nvidia announced on Nov. 12 that founder Jensen Huang is resigning from his positions as president, chief executive officer and board member with immediate effect.
The incident arose from Huang admitting to infidelity toward his wife. Last Sunday (Nov. 8), he sent a letter to company employees apologising and admitting to an extramarital affair. Subsequently, the media further disclosed that he had an improper relationship with Powell, a vice-president of the medical business who is his direct subordinate at the company, escalating the matter from a purely personal morality issue into a corporate governance crisis.
Under Nvidia's company code, such intimate relationships between employees must be declared to the company as a conflict of interest. The board therefore launched an investigation procedure to ascertain whether Huang had made disclosure as required, and whether the improper relationship affected sensitive matters such as relevant personnel appointments and remuneration decisions.
After the news was announced, Nvidia's share price fell in response. In after-hours trading the share price plunged 7%, reflecting shaken market confidence in the company's prospects. This AI empire with a market value of about US$4 trillion lost its helmsman overnight, sparking investor concerns about a leadership vacuum.
Major Wall Street investment banks responded immediately. Bernstein's research department downgraded Nvidia's rating from Buy to Market Perform, sharply cutting its target price from US$400 to US$200, a drop of as much as 50%. Analysts said that given that the incident still contains elements not yet fully uncovered, they tended toward a wait-and-see attitude. Baird also downgraded its rating to Neutral.
Worth noting is that the speed of the Nvidia board's change in attitude surprised the industry. On Nov. 8 of this month, the board had still publicly backed Huang, expressing full trust in his leadership. Only four days later, it convened a meeting to discuss whether he should stay or go, ultimately deciding to accept his resignation.
Huang holds about 3.6% of the shares, and dozens of senior executives at the company report directly to him. His departure means Nvidia faces a major organisational gap and needs to quickly find a suitable successor to ensure the company's stable operation.
Chief Financial Officer Colette Kress has been appointed interim CEO to temporarily take charge of the company's day-to-day operations. The board has formally launched the successor selection process and may seek a suitable candidate externally.
Industry analysis holds that Huang had insisted on safeguarding Nvidia's access to the Chinese market and had close ties with senior US political figures. His departure not only adds variables to Nvidia's own prospects, but may also influence the future direction of US chip export policy. The White House is reported not to intervene in the board's decision-making process, taking the stance of respecting corporate governance.
As the dominant player in the global AI chip market, Nvidia's executive change will receive sustained attention from governments, the industry and capital markets around the world.
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