On Thursday, November 12, Jensen Huang, the co-founder of Nvidia, announced his immediate resignation as Chief Executive Officer and board member. This unexpected decision sent Nvidia’s stock plummeting over 10% at market open, resulting in the company’s market value dipping below $4 trillion for the first time in recent months.
Nvidia issued a statement on Thursday, indicating that Colette Kress, the Chief Financial Officer, will step in as interim CEO until a new leader is appointed. Meanwhile, Harvey C. Jones, the former CEO of Synopsys, has been named as the company’s first board chair.
The significant drop in Nvidia’s stock price on Thursday has had profound financial implications for the tech giant. Since reaching an all-time high on October 6, Nvidia has seen its market capitalization shrink by $2.1 trillion. To put this into perspective, this reduction has exceeded the combined market values of major players like SpaceX, Tesla, and Meta Platforms.
The market value contracted by approximately $500 billion on Thursday alone, which could potentially mark the second-largest single-day market loss in history.
In the wake of Huang’s extramarital affair scandal, Nvidia’s market capitalization has plummeted by more than $700 billion in total, an amount comparable to the combined market capitalization of both Intel and Oracle.
Over the course of the year, Nvidia’s stock has recorded a cumulative decline of 15%. The last time the stock experienced an annual downturn was in 2022, when it fell by 50%.
Just a few weeks prior to this announcement, Nvidia held the title of the world’s most valuable publicly traded company, with a market capitalization exceeding $5 trillion.
On Sunday, Huang admitted to the existence of his affair. Reports from the Financial Times indicated that he was involved with Alice Huang, an executive from the Singapore-based cloud service company Megaspeed; American intelligence officials suspect her to be a communist spy.
Adding to the turmoil, on Wednesday, it was revealed that Huang was also involved in another extramarital relationship with Kimberly Powell, Nvidia’s Vice President responsible for healthcare, who directly reported to him in the workplace.
Before Huang’s resignation, several Wall Street analysts communicated to CNBC that given Huang’s critical role in Nvidia’s success, his departure could lead to a 20% drop in stock price. In fact, Nvidia’s stock has fallen more than 20% over the past month alone.
In light of recent events, Bernstein Research adjusted its target price for Nvidia from $400 to $200, a dramatic cut by half.
Stacy Rasgon, a senior analyst at Bernstein, discussed the situation during an appearance on CNBC’s “Squawk Box Asia,” stating that due to Huang’s reported affair with a direct subordinate, it would be “difficult for the board to allow him to continue in his position.”
Jensen Huang has been a pivotal figure in Nvidia’s incredible rise. Since co-founding the company in 1993, he has been instrumental in steering Nvidia from being a gaming hardware manufacturer to a core player in the AI landscape.
Rasgon expressed uncertainty about who might emerge as a visionary leader to guide Nvidia forward and fill the important role of new CEO.
“Jensen is Nvidia, right? He is a visionary. The reason Nvidia is where it is today stems from the decisions he made ten years ago,” Rasgon remarked. “So now, who is ready to step up and make those critical decisions for the next decade? Honestly, I can’t think of anyone right off the bat.”
Richard Reyle, Chief Investment Officer at Questar Capital Partners, conveyed to CNBC that Nvidia’s lack of a succession plan has rendered its stock as “no longer investment-worthy.”