Nvidia's trillion-dollar bind: Can it afford to lose Jensen Huang?

Nvidia's board of directors faces a trillion-dollar dilemma: Can the chipmaker afford to part with its storied co-founder and CEO, now embroiled in multiple investigations into his affair with an alleged Chinese spy? The disclosure has sent shockwaves through the tech industry and financial markets, with shareholders spooked by the potential fallout.

In recent years, several high-profile CEOs have been ousted after their relationships with employees and customers came under scrutiny, including former McDonald's CEO Steve Easterbrook and Kohl's CEO Ashley Buchanan. But none is so closely identified with their companies as Huang. Over more than three decades, he has led Nvidia as it grew into one of the world's most valuable companies.

Market Impact

Nvidia shareholders have been spooked by the disclosure, with the company's shares shedding 10% of their value — or about $450 billion — in the last two trading days alone. The dramatic drop underscores Huang's importance to the company's market position.

Yorkville Ives tech analyst Dan Ives estimated in a research note that Nvidia could lose as much as 30% of its valuation if Huang is removed from his role, while noting that for now most investors expect the executive to retain his post at the company.

Code of Conduct

Corporate governance experts said Huang's alleged relationship with Alice Huang — a Chinese executive linked to the Singapore-based data center company Megaspeed, which buys AI chips from Nvidia — appears to violate Nvidia's code of conduct. That policy highlights that personal relationships could create a conflict of interest for Nvidia.

Huang himself specifies in the code of conduct that the company's workers have a responsibility "to maintain high ethical standards." Nvidia's code also instructs employees to ask themselves whether they could defend an action if it were made public on social media or known to colleagues. If not, the policy states, "do not proceed."

In a message to company employees, Huang admitted, "I was unfaithful to my wife," and he apologized for hurting her and their two children, both of whom also work at Nvidia. "There is no excuse for what I did. I am deeply sorry," he wrote.

Jay Aldebert, chief growth officer at International Services, said Huang's conduct "is definitely a violation." "How he handled it based on their code of conduct is where you're going to see continued issues," he added.

Board Dilemma

Nvidia's 11-person board includes Huang, although the other board members are considered independent, according to a company regulatory filing. They include California Institute of Technology professor John Dabiri and former Taco Bell International president Melissa Lora.

Columbia's Rajgopal said this case is unprecedented: This is an outlier — I don't remember a case like this. This company is so important to the U.S. in terms of AI, especially with China and other powers. So even if there is a violation of the code of conduct, if I were the chair of the board, I would not dismiss him.

Rajgopal added that Nvidia board members should demonstrate their independence by hiring a law firm to help with the investigation, and immediately develop a succession plan for Huang. "These are effectively run like family private companies, but they are mega-cap public companies where most of the capital comes from the public," he said. "There is a duty above and beyond."

Huang has said he has more than 60 direct reports in a corporate structure that keeps him at the center of decision-making at Nvidia. As various investigations ramp up, the succession plan to replace him remains unclear, heightening pressure on the board.