Nvidia shares fell sharply after Jensen Huang announced he was leaving his post as CEO of the company. On Sunday, Huang admitted to an extramarital affair with the head of the cloud company Megaspeed and his namesake Alice Huang, whom US intelligence agencies consider a Chinese spy. On Wednesday, reports emerged of another office romance between Huang and Nvidia Vice President Kimberly Powel.
Image source: Nvidia
Currently, Nvidia shares have fallen in price by 13%. According to some Wall Street analysts, Huang’s departure as CEO could trigger a 20% drop in shares, given how important he was to Nvidia’s success. Over the past month, the company’s shares have already lost more than 20% in price. Today, research firm Bernstein cut its target price for Nvidia shares in half, from $400 to $200.
According to analysts, Huang’s alleged affair with an employee who is directly subordinate to him deprived the board of directors of the opportunity to retain him in his position. Huang has played a key role in Nvidia’s growth since the company was founded in 1993. He was the main driving force behind Nvidia’s transformation from a video game hardware maker to a company at the heart of the artificial intelligence boom.
It is unclear who could be the “visionary” who will lead Nvidia in the future as the new CEO. Experts believe that Nvidia’s lack of a succession plan makes the company’s shares “unsuitable for investment.” Given recent events, Huang’s successor as head of the company will likely maintain a very conservative management style.
Image source: CNBC
Instability in Nvidia’s management creates new opportunities for the company’s competitors: shares of AMD and Broadcom rose 1.4% and 1%, respectively, amid expectations that these companies could take over part of the chip giant’s business. Investors believe a shakeup at Nvidia’s top management could allow its main rivals to close the gap. In the second quarter, Nvidia chips accounted for more than 60% of all computing power used in artificial intelligence.
The uncertainty surrounding Nvidia could lead to a global review of supply chains. On Thursday, Samsung shares rose 1%, while TSMC shares fell 2.3%. Samsung is actively developing its partnership with AMD, while SK Hynix remains the main supplier of high-speed HBM memory for Nvidia. At the same time, shares of other chip manufacturers, such as Intel, Marvell, Arm and Qualcomm, were trading in the red zone.
Image source: Bloomberg
Beyond the memory giants, a number of South Korean startups, including AI chip developer FuriosaAI and Samsung-backed MangoBoost, are also looking to challenge Nvidia’s dominance by offering alternative technology solutions.
The scandal could also play into the hands of Chinese companies seeking to push Nvidia out of the domestic market, especially as US tightening export rules have brought chip shipments to China under greater scrutiny. Any further tightening of restrictions will create favorable conditions for local semiconductor manufacturers such as Cambricon Technologies, Hygon Information Technology and Semiconductor Manufacturing International Corp. Cambricon shares rose more than 8%, while Hygon added 3.1%.
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