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Nvidia CEO Jensen Huang delivers his keynote on the company’s GTC event in Berlin, Germany, in October.Markus Schreiber/The Associated Press
Nvidia Corp., the company powering the AI revolution, has decided its founder and chief executive Jensen Huang is too big to fire.
Over the weekend, Mr. Huang admitted to an affair with a woman who U.S. intelligence services flagged as a Chinese spy. The individual, named Alice Huang and unrelated to the CEO, is a Chinese citizen and an executive at Singapore-based data centre operator Megaspeed, a major Nvidia customer.
As part of his mea culpa on Sunday, Mr. Huang signalled he misled Nvidia’s board.
Nvidia stock slides as company probes Jensen Huang affair with alleged Chinese spy
“To my colleagues at NVIDIA, including those I have worked alongside for decades, and to our board, partners, and shareholders around the world: you deserve better from me,” said Mr. Huang in a memo sent to employees.
“My responsibility is to serve you and be worthy of your trust. I have fallen short of that responsibility,” said the CEO who has emerged as the central banker for AI companies, lending them billions, along with being their go-to computer chip supplier.
Infidelity isn’t the issue here. Integrity is.
For months, Nvidia has been dogged by allegations that Mr. Huang’s affair – he has been married since 1985 – influenced the company’s chip sales to Megaspeed, along with how Nvidia did business with China.
In May, short seller Culper Research published a 40-page report on Nvidia titled “The China Problem.” The New York-based activist fund pointed out Mr. Huang had “an uncomfortably close relationship” with a Megaspeed executive. Culper also alleged Megaspeed circumvented U.S. trade restrictions by smuggling Nvidia chips to Chinese companies.
Nvidia said on Sunday its board was probing whether CEO Jensen Huang had been the target of a foreign intelligence effort, after a media report alleged he had a close relationship with a Chines…Full Caption
Roughly a year ago, U.S. intelligence services told the White House that Mr. Huang’s affair was a potential issue in the country’s relations with China, according to the New York Times. Chinese authorities deny the Megaspeed executive is a government agent who successfully executed what spy novel fans know as a “honey trap.”
Only this weekend did Nvidia’s board announce it was launching an investigation, after reports that Mr. Huang “has been the target of a foreign intelligence effort.”
In a statement released the same day as Mr. Jensen’s apology that raises questions about Nvidia’s governance, the company said in a press release: “The Board has confidence in Jensen and his leadership team.”
That line reeks of directors who have already decided on a course of action – they are going to let the CEO stick around – and have now commissioned an inquiry to support their decision. Nothing to see here. Just drive on.
Nvidia’s board, which includes seasoned executives from venture capital funds and investment banks, is abdicating its responsibilities. Common sense dictates the directors should wait for the results of the investigation before giving Mr. Huang a seal of approval.
Think of the implications of Culper’s allegations. The short seller said Mr. Huang had a romantic relationship that led Nvidia to favour Megaspeed, a customer that is operating in defiance of U.S. trade regulations, and counter to U.S. interests.
If this is true, the CEO deserves to be fired.
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U.S. President Donald Trump stands with Mr. Huang after presenting him with the National Medal of Science last month.Evan Vucci/Reuters
Mr. Huang is a larger-than-life Silicon Valley personality. Since launching Nvidia in 1993, he has become one of the wealthiest people on the planet by building the infrastructure that runs AI, then serving as the sector’s financier and cheerleader-in-chief.
Nvidia’s leadership team includes several of the CEO’s children. It doesn’t seem to include an obvious successor to a 63-year-old with a penchant for black leather jackets and the ear of the U.S. president.
Founders like Mr. Huang tend to believe they are immortal. The board’s job is to remind the CEO that graveyards are full of supposedly indispensable executives.
If Nvidia’s directors believe their CEO is somehow irreplaceable, they need look no further than their Silicon Valley neighbours at Apple Inc. Co-founder Steve Jobs seemed essential until the day he took a medical leave. Successor Tim Cook guided the company to new heights.
Nvidia’s market capitalization has dropped by more than a US$1-trillion over the past month, with its stock price down 23 per cent as the AI sector sold off and news of the CEO’s transgressions spilled out.
The sell off speaks to a lack of investor confidence. It should be a wake up call to the Nvidia board. No CEO is too big to be fired.