Nvidia shares fell about 8 percent in after hours trading after The Wall Street Journal reported that the board is preparing to oust CEO Jensen Huang. The board met on Wednesday to discuss his future, according to people familiar with the matter, and the company has not made an announcement about any decision.
Why it matters
The report followed a second disclosure on Wednesday. The New York Times reported that Huang had an extramarital relationship with an Nvidia executive who reports to him. On Sunday, Huang acknowledged in a letter to staff that he had been unfaithful to his wife and apologised for violating their trust.
The market reaction was swift. Nvidia had gained 2.9 percent in the regular session to close at 173.73 dollars, steadying after two days of sharp losses. After the reports, the shares fell to about 159 dollars, and rival chipmakers moved in opposite directions, with Advanced Micro Devices up about 4 percent and Broadcom up about 2.8 percent.
What happens next
Analysts moved quickly too. Baird said Huang might have to step down, downgraded Nvidia to neutral and slashed its price target 60 percent to 200 dollars. Prediction markets put the odds of Huang leaving by the end of the year at about 75 percent, up from the high teens a day earlier.
The board has said it has no reason to believe that either national security or Nvidia secrets were compromised, and it expressed confidence in Huang leadership when it opened its investigation. Beijing has denied that there was any Chinese plot to spy on Huang. What the board decides next will shape the company that sits at the centre of the AI boom.
The governance questions are now as important as the business. Nvidia board has hired Wachtell, a firm known for boardroom battles, to advise on the probe into Huang. Huang is 63, the company largest shareholder with about 3.6 percent, and one of the richest people in the world after building Nvidia into the centre of the AI boom. The company has committed 30 billion dollars to an OpenAI financing round and said it would cover 105 billion dollars of OpenAI rent payments in a 4.3 gigawatt Ohio data centre deal with SoftBank. The circular financing deals, in which Nvidia pumps cash into its customers to fuel more chip sales, are now under scrutiny alongside the leadership question.
