According to media reports, NVIDIA's board of directors held an internal meeting on Wednesday to decide on the future of CEO Jensen Huang, and has collaborated with external organizations to select candidates for the new CEO position, including considering appointing a transitional CEO.
According to Bloomberg and The Wall Street Journal, Jensen Huang has been involved in several scandals involving extramarital affairs. Previously, The New York Times revealed that Jensen Huang had an improper relationship with one of his direct subordinates, which further exacerbated earlier allegations that he was involved with a Chinese woman.
Reports indicate that as NVIDIA is set to release its quarterly financial report next week, investors are forced to confront an unprecedented "key personnel risk." Wall Street is also assessing the extent of direct impact that the departure of this important figure in artificial intelligence infrastructure could have on the capital chain, customer confidence, and development prospects of the entire AI industry.
Independent investigation and the board of directors face a test
According to Reuters, NVIDIA's board of directors initiated an internal investigation on Sunday in response to the national security vulnerabilities mentioned in the news reports.
The report also states that NVIDIA's governance structure is under strict scrutiny from the outside world. There is no chairman of the board among the company's 11 directors, and several independent directors have been in office since the 1990s, including Mark Stevens. The composition of the board of directors is said to be highly rigid.
The head of research at ISS in the United States, Marc Goldstein, stated that although Wall Street generally tolerates charismatic founders from Silicon Valley to some extent, given that Jensen Huang's judgment has been questioned, the board of directors must hire independent legal counsel to enhance the credibility of the investigation.
He suggested that the board of directors consider having long-serving directors recuse themselves from the investigation to prevent potential legal challenges from shareholders in the future. Former U.S. Department of Justice official and current chairman of Katten, Gil Soffer, stated that if the investigation confirms that Jensen Huang concealed relevant relationships and engaged in improper behavior, then his removal would be an appropriate decision.
Key question: Did Jensen Huang disclose it voluntarily?
One of the core focuses of the investigation is whether Jensen Huang disclosed this relationship to the company at any time.
NVIDIA's code of conduct lists "personal relationships" as one of the situations that may lead to conflicts of interest, and explicitly requires employees to proactively contact the legal department for guidance when facing potential or actual conflicts of interest.
Gil Soffer stated in the email that if Jensen Huang had disclosed the information completely and truthfully, it would be beneficial to his current situation, as it would mean he did not conceal this relationship, and the board of directors would also have the opportunity to assess it and implement corresponding control measures.
Soffer also pointed out that before more facts are made public, it is still impossible to determine whether this relationship has actually caused a conflict of interest, whether the board of directors' handling so far has been appropriate, and what degree of punishment Jensen Huang should receive. He stated that if Jensen Huang has concealed this relationship and engaged in improper behavior, 'removal from office may be an appropriate measure of action.'
According to NVIDIA's latest proxy statement, Jensen Huang's total compensation over the past three years amounted to $120 million, which was mainly in the form of stock awards. The company's articles of association allow the board of directors to remove him from his position by a majority vote, under both 'founded' and 'unfounded' circumstances.
Wall Street Re-evaluates "Key Person Risk"
The uncertainty of succession quickly triggered a reaction in the financial markets. Reports indicate that during after-hours trading on Wednesday, NVIDIA's stock price tumbled by 9%, dragging down other artificial intelligence concept stocks such as Intel and Dell Technologies as well.
Karobaar Capital Chief Investment Officer Haris Khurshid stated that this is no longer just a single individual scandal, but has evolved into a serious governance and key personnel risk. Investors are beginning to reprice their sentiment towards the entire AI sector.
Integrity Asset Management Portfolio Manager Joe Gilbert stated that this represents "undoubtedly a negative impact" on NVIDIA and the entire AI ecosystem, as it is almost impossible for the newcomers to replicate Jensen Huang's strategic vision.
Jonestrading Chief Market Strategist Michael O and Rourke pointed out that NVIDIA previously predicted sales growth of 70% this year. With its aggressive sales strategy and supplier financing model, the successor may need an entire year to "put out the fire and clean up the mess."
Miller Tabak + Co Chief Market Strategist Matt Maley warns that as an important financier in the AI industry, NVIDIA's senior management turmoil could lead to reduced spending across the industry. Zacks Investment Management's Brian Mulberry believes that even if Jensen Huang steps down from his CEO role, he may still retain certain functions as a strategic advisor or board member.
The above content is all based on media reports and the views of interviewed individuals; there is still uncertainty regarding the results of relevant investigations and the final decisions of the board of directors.
