Nvidia’s Board Meets on Jensen Huang’s Future as Pressure Mounts on Chipmaker

Synopsis

The Nvidia board met late on Wednesday to determine whether Jensen Huang will stay at the helm of the company, days after he acknowledged that he had cheated on his wife, days after the company launched an independent investigation into claims the company was the subject of a foreign intelligence program. A further press report alleged a relationship with an executive. The Congress is demanding answers and shares have lost hundreds of billions of dollars. Nvidia said Thursday morning it has yet to make a decision.

The Nvidia board convened late on Wednesday to discuss whether to continue with the job of chief executive, a source with knowledge of the matter told Reuters. By the end of the night there was no decision. It came as a volte-face from a meeting on Sunday, when the directors were optimistic of him.

A memo on Sunday to a vote by the board

Nvidia's board has been asked to review allegations that Huang had been the subject of a foreign intelligence operation, it said Sunday, Nov. 8. The announcement came after he was reported to be dating a Chinese businesswoman, Alice Huang, who is not related to him.

She is said to hold a senior position at data-centre outfit Megaspeed, which is based in Singapore and an Nvidia customer. According to a person familiar with the situation, NBC News, US intelligence agencies concluded that she was a Chinese spy.

The board stated there was no evidence that the national security or Nvidia secrets were breached. In a letter to employees, Huang said he "did not have an excuse for what I did. He said he was "on board" with the investigation and would "do everything I could. Huang was “committed to a seamless transition as CEO,” said John Rizzo, Nvidia's head of public policy communications. The shares dropped 8% on Monday.

The directors appointed an independent investigation team, composed of former acting US Attorney Joon H. Kim and the law firm Wachtell, Lipton, Rosen & Katz, to probe.

A second report alters board's calculation

The New York Times on Wednesday reported that Huang had a romance with an employee, Kimberly Powell. Huang's crisis-communications firm said it did not immediately respond to a request for comment. That was followed by a report in the Wall Street Journal that the board was readying to oust him and a decline of Nvidia's stock price of over 8% after hours. Nvidia is meeting in the evenings to discuss how to proceed with the fate of CEO Jensen Huang.

Bylaws allow a majority of the Board to remove the CEO “with or without cause.” There are 11 directors, including Huang, who are not independent of Nvidia. Removal would not mean leaving the board since he's still CEO, although a significant number of shareholders do own approximately 3.6% of the company.

Sources close to the situation have indicated some directors want to put in place interim CFO Colette Kress as the new CEO, and an outside search firm has been hired. The board briefs White House at meeting, says senior administration official. Nvidia did not immediately respond to a request for comment on the meeting.

Washington presses for answers

On Wednesday, Sen. Kevin Cramer, R.-N.D., who chairs the Senate Banking Committee, renews his demand for Huang's resignation. Both representatives, Mast and Moolenaar, indicated they are waiting for him to respond, and Mast replied “yes” when asked if a subpoena was being considered.

Three House Republicans, representing three committees have asked Huang to provide them a closed-door briefing by Nov. 18 on the relationship and on Nvidia's protections for customer information provided to it. The incident has been used by legislators in both parties as a reason to place a ban on selling chips to China.

Megaspeed has been charged with violating the US export ban and bringing in Nvidia chips to China. Huang has stated that his interactions with its employees were standard interactions that he has had with Chinese customers.

A company is not valued without its founder

Nvidia's after-hours losses would put it down about $600 billion in market value since the board announced the investigation. The market has priced in a Nvidia without Huang, said Armina Rosenberg of shareholder Minotaur Capital, adding that the company is more likely to have a different CEO.

There are two dates that stand out. Nvidia is set to release its quarterly results on November 17 while the deadline for the congressional briefing is one day later. The Kim-led investigation has not issued any findings.

A vote of the board to decide the fate of a $4 trillion company is pending which is not yet known to the public.