Nvidia Loses Over $600 Billion as CEO Huang's Future Comes Into Doubt

Nvidia has lost more than $600 billion in market value since the end of last week, according to Axios, as reports that its board was preparing to remove CEO Jensen Huang shook one of the most important companies in the U.S. stock market. Shares fell sharply in after-hours trading Wednesday.

The sell-off matters well beyond one company. Nvidia is deeply tied to the AI boom and to the broad stock indexes that many retirement and investment accounts follow.

What has been reported

Axios said Huang had admitted to an extramarital affair with a woman the U.S. government believes to be a Chinese intelligence asset. The New York Times then reported Wednesday evening that Huang also had a romantic relationship with an Nvidia executive who reports to him. The Wall Street Journal and other outlets reported that Nvidia's board was preparing to oust him. Nvidia's response was not included in the Axios report.

What this means for investors

With a market capitalization of roughly $4.18 trillion through Wednesday's close, Nvidia is the world's second-largest publicly traded company, behind Apple, Axios reported. That size gives it significant weight in market-capitalization-weighted indexes such as the S&P 500 and the Nasdaq 100, so its losses reach many portfolios.

The stock was down roughly 30% from its recent high through Wednesday's close, wiping out nearly $1.59 trillion in shareholder wealth. Bernstein Research downgraded the stock Wednesday to “market perform” from “outperform,” and Morgan Stanley removed it from its list of top picks after a decline of more than 25% since it was named last month.

Why Nvidia is so central to AI

Axios said the company dominates the market for graphics processing units, the costliest input in AI data centers, at about 75% of a data center's total cost, per Goldman Sachs. Nvidia also finances and backstops a large share of AI computing power, supporting AI coding companies, data center operators and so-called neoclouds.

It has put more than $2 billion into CoreWeave, a troubled neocloud whose borrowing costs have soared in recent weeks, and holds equity stakes in Anthropic and OpenAI. Huang's influence has been outsized as well: in June, his positive remarks about Marvell Technology sent that company's stock up nearly 33% in a single day.

A shaky backdrop for AI stocks

The turmoil comes as the AI trade is already under strain. Axios said investors are worried about whether the AI build-out can continue, as rising interest rates and a saturated market limit bond sales used to pay for data centers. Chipmakers have been hit particularly hard.

Eric Sheridan, a Goldman Sachs analyst, said in a new report that the stakes are higher now because the cycle is further along and spending has grown considerably, which may add to investor nervousness.

What happens next

If Huang does leave, analysts expect disruption. Gil Luria of D.A. Davidson told Axios that decisions on acquisitions, investments and product roadmaps would likely be paused, which would slow the company when it can least afford it.

Huang co-founded Nvidia in 1993 and has led it since. According to FactSet, the stock's total compound return with dividends reinvested since its first day of trading is 462,906%. Whether the board acts, and who would lead the company afterward, had not been announced in the reports.

Around Prague, based on reporting by Axios

Cover photo: Coolcaesar / Wikimedia Commons, CC BY-SA 4.0, cropped

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