Nvidia shares fell nearly 9 per cent in pre-market trading on Thursday as the chipmaker's board prepared to remove chief executive Jensen Huang following revelations of personal misconduct. The decline wiped another $360 billion from the company's value, bringing losses for the week to $640 billion or 14 per cent. Nvidia has shed around $2 trillion of value since reaching its peak on 6 October.
Huang, 63, admitted on Sunday to cheating on his wife with Alice Huang, described as a suspected Chinese spy and no relation to him. Reports then emerged of an alleged extramarital relationship with Kimberly Powell, 48, Nvidia's vice president of healthcare. Under Nvidia's code of conduct, employees are instructed to 'avoid situations where our actions conflict' including 'personal relationships'. An alleged affair between Huang and a direct report would constitute a violation of these rules.
The board held crisis talks on Wednesday night, with speculation intensifying that Huang's removal is imminent. The tech executive has run Nvidia for 30 years as founder, president and chief executive. Chris Beauchamp, chief market analyst at IG, said: 'One of the most impressive careers is set to end. Huang might have been able somehow to cling on at Nvidia after one revelation (though news about chip shipments made that doubtful), but after two, one of which involving a direct report, his fate is sealed.'
The absence of a clear succession plan has created nervousness among investors, particularly with an earnings update scheduled for the following week. Chris Weston, head of research at Pepperstone, said the board's decision represented 'a groundbreaking decision, one with potentially profound implications for Nvidia and the broader AI ecosystem'. Weston added that investors faced uncertainty about whether new leadership could maintain Nvidia's exceptional growth trajectory and protect its competitive advantages, with investors questioning the company's ability to execute and deliver on its innovation pipeline.
The crisis at Nvidia follows weeks of turmoil for artificial intelligence stocks as investors grew concerned about whether massive spending on infrastructure such as data centres would generate acceptable returns. Democrat victories in US midterm elections last week fuelled anxiety that regulatory action on data centres could slow the artificial intelligence sector. The period saw heavy losses stoke broader concerns about whether a stock market bubble had formed.
For UK savers and investors with holdings in Nvidia, the leadership crisis and uncertainty about the company's future direction creates additional volatility on top of existing concerns about artificial intelligence sector valuations and returns.