Nvidia’s Board Weighs Ousting Huang, Reports Say

SANTA CLARA, Calif., Nov. 11 — Nvidia’sNvidia’s board met late Wednesday to decide whether to remove Jensen Huang, its co-founder and chief executive, CNBC reported, as did Reuters, citing a person familiar with the matter. The meeting followed a report in The New York Times, as Reuters and CNBC relayed it, that he had had a romantic relationship with an Nvidia vice president who reports to him; the Times cited five people who worked at the company, Reuters said.

By 5:25 a.m. Eastern on Thursday, Nvidia had announced no decision. Its shares, which closed Wednesday at $173.73, were trading 6 percent lower before the open. Nvidia’s newsroom carried no board statement after Tuesday’s, and the company had filed no new Form 8-K with the Securities and Exchange Commission since the inquiry was announced; its latest filing was still a Form 4 of Nov. 6.Form 8-KThe “current report” companies file with the SEC “to announce major events that shareholders should know about,” in Investor.gov’s words. The form’s instructions require one when a chief executive “retires, resigns or is terminated,” generally within four business days.

The reports turned an inquiry into a question of succession at what Reuters calls the world’s dominant supplier of AI chips, days before it reports its fiscal third-quarter results on Tuesday, Nov. 17. “The market is starting to price Nvidia without its founder as the likely outcome, not a tail risk,” Armina Rosenberg, a portfolio manager at Minotaur Capital, which holds Nvidia shares, told Reuters. If the after-hours losses held, Reuters said, Nvidia would have lost about $600 billion in market value since its board announced its investigation.

The market is starting to price Nvidia without its founder as the likely outcome, not a tail risk.

The Reports

The Wall Street Journal was first to report that the board was preparing to force out Mr. Huang, minutes after the Times’s report, CNBC said; the Journal cited unidentified people familiar with the matter, according to Bloomberg. Bloomberg reported that the board had been working with an outside firm to identify potential replacements and was weighing a temporary chief while it searched for a permanent one, citing a person familiar with the situation.

Some directors favor appointing Colette Kress, the chief financial officer, as interim chief executive if Mr. Huang is ousted, Semafor reported, citing people familiar with the matter; the full board had yet to decide, it said.Colette KressNvidia’s finance chief for more than a decade, Reuters says. Ms. Rosenberg called her the natural choice as interim chief, but said the bigger question was who would lead Nvidia’s technology roadmap in the longer term. The board briefed the White House on its planned meeting, according to a senior administration official, Semafor reported.

Under Nvidia’s bylaws, a majority of directors can remove Mr. Huang “with or without cause,” Reuters reported.The BoardNvidia has 11 directors and considers all but Mr. Huang independent, Reuters reported. Mr. Huang, 63, owns about 3.6 percent of the company’s stock, by Reuters’s count. Reached by phone on Wednesday and asked about the relationship, Mr. Huang said, “I don’t think you should be talking to me directly,” and hung up, the Times reported, according to Reuters. Reuters said it could not immediately verify the Times’s report. Nvidia and the executive did not respond to CNBC’s requests for comment, and Nvidia did not immediately respond to Reuters, Bloomberg or Semafor.

On Sunday the board had opened its inquiry “in light of recent reporting that founder and CEO Jensen Huang has been the target of a foreign intelligence effort,” and said it “has no reason to believe that either national security or NVIDIA secrets were compromised,” that its inquiry “will examine all available information” and that it “has confidence in Jensen and his leadership team.” Mr. Huang wrote to employees the same day, “I was unfaithful to my wife.” His email named no one. On Oct. 29 the Times had reported, by Reuters’s account, that he had a relationship with Alice Huang, a former executive of Megaspeed, a Singapore company, who U.S. authorities had investigated and concluded was a Chinese intelligence asset; she is not related to him. “Our relationship, our interactions, have been related to Megaspeed, and it was all completely normal and not unusual,” Mr. Huang told Bloomberg News on Oct. 29, as quoted by Taiwan News; he also said the government had not told him of its suspicions. Nvidia told the Times that his interactions with Alice Huang were “not unusual or unexpected,” Decrypt reported. China has denied the allegations, NBC News noted. On Tuesday the independent directors retained Joon H. Kim, a former acting U.S. attorney in Manhattan, and Wachtell, Lipton, Rosen & Katz to run the inquiry.

The Money

After rising 2.87 percent on Wednesday, their first gain of the week, Nvidia’s shares fell more than 8 percent after the close, to $159.51, CBS News reported.NVDANasdaq173.73▲4.84+2.9%Nvidia · Wednesday’s session At 5:24 a.m. Eastern on Thursday they were at $163.31 by CNBC’s quote service. Nvidia’s Frankfurt-listed shares were down 7.1 percent in premarket trading on Thursday, CNBC reported in an update at 2:28 a.m. Eastern.The WeekNvidia closed at $186.64 on Friday, Nov. 6, $178.67 on Monday, $168.89 on Tuesday and $173.73 on Wednesday, by Nasdaq’s record.

Nvidia’s rivals rose instead: at 5:24 a.m., by CNBC’s quote service, AMD was up 4.09 percent and Broadcom 2.91 percent.AMDNasdaq552.90▲37.69+7.3%Advanced Micro Devices · Wednesday’s session

“In our view the writing is on the wall that Jensen’s days at Nvidia could be numbered and we would expect this to be a very fluid situation over the next 48 hours,” Dan Ives of Yorkville Ives & Co. wrote overnight, as quoted by CNBC. He put Nvidia’s value at $300 a share with Mr. Huang as chief executive and $225 without him, CNBC reported. In a report quoted by CBS News, Mr. Ives wrote that Nvidia “likely now has to move on without Jensen at the helm.”

On Monday Stacy Rasgon of Bernstein had warned against removing him. “The primary beneficiary of Jensen’s removal as NVIDIA’s CEO would clearly be China,” he wrote, as quoted by NBC News. On Thursday he told CNBC that the alleged affair with a direct report made it “much tougher for the board to leave him in position”; Bernstein halved its price target, to $200, CNBC reported. Jeffrey Sonnenfeld of the Yale School of Management told NBC News that Mr. Huang “has lost his legitimacy to lead internally in the eyes of the company, and he’s lost his external credibility in the eyes of key constituents, including customers.”

Asia and Washington

Asian chip shares fell on Thursday: Taiwan’s Taiex closed 2.63 percent lower, with TSMC down 2.30 percent, and in Seoul SK hynix fell 1.8 percent, though Samsung Electronics rose 0.97 percent. Tokyo’s Advantest lost 4.63 percent. “Market sentiment was hurt by an approximately 8 percent decline in Nvidia’s shares in after-hours trading,” Tsai Ming-han, an equity analyst, said, as quoted by CNA. “The KOSPI was hit by uncertainties stemming from the scandal involving Nvidia CEO Jensen Huang,” Lee Kyoung-min of Daishin Securities said, as quoted by Yonhap.

On Wednesday Senators Elizabeth Warren of Massachusetts and Chris Coons of Delaware, both Democrats, wrote to Commerce Secretary Howard Lutnick, Secretary of State Marco Rubio and Stephen Miller, the White House chief of staff. “We write to request that the Department of Commerce, the Department of State, and the White House preserve all documents, communications, records, and other materials regarding the export of NVIDIA’s advanced AI chips to China or to entities that may divert such chips to China,” they wrote. They asked for written confirmation by Nov. 17.

Two House Republicans said on Wednesday that Congress was prepared to subpoena Mr. Huang, Bloomberg reported; John Moolenaar, chairman of the House China committee, said Mr. Huang had until the end of that day to answer three chairmen’s request for a closed-door briefing on Nov. 18. By 5:25 a.m. Thursday the committee had posted no word of a reply.

Nvidia reports on Tuesday, Nov. 17, with a call at 5 p.m. Eastern. The senators’ deadline falls the same day, and the chairmen’s requested briefing the next.