Nvidia removes CEO Jensen Huang amid second scandal

Nvidia, the world's most valuable chip supplier, announced on Thursday that its long-time chief executive, Jensen Huang, is stepping down as president, CEO, and board member effective immediately. The decision follows a late Wednesday board meeting where directors addressed reports of a second extramarital affair involving the 63-year-old executive. The company stated that Colette Kress, currently serving as Vice President and Chief Financial Officer, will assume the role of interim CEO.

The New York Times first reported the latest controversy, alleging that Huang had a relationship with a senior Nvidia executive who reported directly to him. Both individuals are married, with Huang having wed his wife Lori in 1985. This revelation came just three days after Huang acknowledged a previous relationship with a Chinese woman whom US intelligence agencies believe was spying for China. The woman, identified as Alice Huang with no familial relation to the CEO, is a former executive at Megaspeed, a Singapore-based cloud computing firm and major Nvidia client.

US authorities are investigating Megaspeed on the suspicion that it secretly shipped some Nvidia chips to China, thereby violating Washington's restrictions on high-end semiconductors. These advanced processors are critical for training large artificial intelligence models. While Megaspeed denies the allegations and has pledged to cooperate with investigators, the alleged spy has been barred from entering Singapore and Taiwan, a key hub for chip manufacturing.

Market observers suggest that while the board initially supported Huang after the first scandal, the second incident caused significant reputational damage to one of the world's top three companies by market value. According to The Wall Street Journal, Huang did not believe in formal succession planning, leading to the rapid appointment of Kress. Bloomberg reported that the board is now working with advisers to identify a permanent successor, with candidates including other senior executives and members of Huang's family, such as his daughter Madison and son Spencer.

The dual scandals have taken a toll on Nvidia's financial standing. Since the first affair was revealed on Sunday, the company's market capitalization has dropped by more than 600 billion dollars to 4.2 trillion dollars. Shares fell over 9% in premarket trading on Thursday, following a 10% decline earlier in the week. Despite these fluctuations, many analysts expect near-term sales to remain resilient due to sustained high demand for Nvidia's advanced chips, which recently hit all-time highs as US tech giants increased spending on AI infrastructure.

Dan Ives, a tech analyst at Yorkville Ives, noted that while Huang was central to the company's narrative, the firm's entrenched position in the AI chip market remains strong. However, the biggest long-term risk lies in strategy and execution, as Huang was known for personally driving key technical decisions. His departure is also expected to disrupt Nvidia's strong relationships with AI hyperscalers, TSMC, and foreign governments, particularly China, where Huang served as a primary lobbyist for easing US export curbs under President Donald Trump.

Huang, often dubbed a rockstar CEO for his distinctive leather jackets, steered Nvidia for over three decades. His hands-on approach and insistence on a flat management structure, where around 60 executives reported directly to him, created a significant key-person risk. Although the company has built a durable moat with deep expertise in chip design and software, generating profits that topped 120.1 billion dollars last year, investors may still question its operational stability without its founder at the helm.

The departure also has implications for the US-China AI race. As Beijing invests heavily in domestic chips to reduce reliance on US hardware, Chinese AI firms are reportedly trying to rent Nvidia-powered computing capacity at data centers outside the country. This move aims to mitigate risks from potential further tightening of US restrictions. The issue is expected to dominate discussions during the upcoming APEC gathering in Shenzhen, where US President Donald Trump and Chinese President Xi Jinping are set to meet next week.