Investors worry the AI trade needs Nvidia’s Jensen Huang and its largesse

• Investors fear Jensen Huang’s exit could weaken Nvidia’s role in funding the AI boom and unsettle the crowded AI trade, Reuters reports.
• Nvidia shares fell after reports of investigations into Huang’s alleged affairs, while rivals Broadcom and AMD rose and Chinese GPU makers gained on hopes of market share.
• Nvidia has US$164.5 billion in financial commitments, including OpenAI and data-centre deals; investors say its GPUs remain strong, but leadership change raises long-term risk.

SINGAPORE – Investors fear an ouster of chief executive officer Jensen Huang might dampen Nvidia’s willingness to bankroll the artificial intelligence boom, in yet another pressure point on the global markets’ most crowded trade.

The board of the world’s dominant chipmaker, at the cutting edge of computing, was meeting late on Nov 11 to decide Huang’s fate as it grapples with reports of two extramarital affairs involving its long-time leader.

Traders’ first reaction was to punish Nvidia shares and those of its customers, including data centre firms CoreWeave and Naver, while pushing shares of chipmaking rivals Broadcom and AMD higher.

Shares in China’s leading makers of graphics processing units (GPUs) surged on Nov 12 as mounting turmoil at Nvidia boosted expectations that local chip suppliers could win greater market share. Moore Threads, MetaX and Cambricon all jumped nearly 10%.

But the worry in the market is that the stakes are far higher and that if Nvidia – under a different leader – backs away from a strategy of financing data centres, then the AI boom itself loses momentum.

“He’s the face of Nvidia, and Nvidia has been front and centre of the AI build-out,” said Jun Bei Liu, lead portfolio manager at Ten Cap, a fund manager in Sydney.

“There’s just a lot of uncertainty to come... not just for Nvidia, but also for AI as a whole – all the businesses that they co-invest and sponsor,” she said. “I think the fear is that the music might stop.”

Nerves, plus the 8% after-hours drop in Nvidia stock, sent Nasdaq 100 futures down nearly 1% in Asia.

Nvidia has been the banner stock of the AI revolution, with its chip technology ahead of rivals and enormous sales driving the share price up some 900% over the four years since the launch of OpenAI’s ChatGPT ushered in the AI era.

But Nvidia has also become a torchbearer and financier, anticipating demand for ever more powerful chips while sinking billions of dollars into funding its own customers via a mix of equity investments and other promises.

Nvidia’s board launched an investigation into Huang following reports he had an extramarital affair with a businesswoman alleged to be a Chinese spy. A subsequent report about another affair came out ahead of the Nov 11 board meeting.

“I don’t see the next 12 to 18 months of revenue suddenly disappearing if Jensen were to leave,” said Shay Boloor, chief market strategist at Futurum Equities.

“My bigger concern is the next decade, because Jensen isn’t simply Nvidia’s CEO, but he’s the person who has consistently identified where computing is going before customers even realise,” he said.

“Replacing that strategic vision... is an enormous challenge.”

Nvidia sinks, takes some along

A departure or diminished role for Huang would leave a vacuum at the top of the roughly US$4 trillion (S$5.14 trillion) chipmaker that he co-founded and built over more than three decades to become the top supplier of chips and the nexus of the US-China technology rivalry.

Huang has never anointed a successor, but analysts said they see two likely internal candidates: engineer Ian Buck and chief financial officer Colette Kress, though both lack his rock-star cachet and high profile that have drawn him near to world leaders.

Chipmakers in Asia, whose stocks have soared with Nvidia and the AI spending boom, but lately sagged on worries about funding costs and the demand outlook, slipped.

Nvidia listed some US$164.5 billion in financial commitments in its most recent earnings report, with an obligation capped at US$105 billion on an OpenAI data centre in Ohio and lease and other capacity guarantees topping US$50 billion.

The company is also one of the investors in Claude chatbot creator Anthropic’s initial public offering. The listing in November is set to serve as a test of investor appetite for all things AI.

Shares in Nvidia-backed data centre operator CoreWeave, which surged on Nov 11 on upbeat earnings, fell more than 6% after hours. Shares in South Korean internet firm Naver, in which Nvidia took a US$1 billion stake by financing a data centre expansion, also dropped nearly 6%.

To be sure, investors said, the quality of Nvidia’s products is not likely to change, and change at the top will not quickly hit demand.

“Nvidia’s core asset is its advanced GPUs, which still have no real substitute in the market,” said Anna Wu, founder of Floodlines Research. “The AI trade rests on that demand, not on one individual.”

But when the company reports earnings next week, the focus will inevitably be on leadership, strategy and whether a sales outlook formed under Huang still holds up under a potential successor. REUTERS