'Irreparable loss of trust,' analyst warns

Fallout reaches Nvidia, US government

No dual-class shares mean Huang has little recourse if board acts

Expert: Huang may have to cede some decision-making power even if he stays

Nvidia CEO Jensen Huang, who has admitted to an affair with a businesswoman suspected of being a spy for Chinese intelligence, faces a 50-50 chance of being retained by the Nvidia board, analysts say. [Reuters]
Nvidia CEO Jensen Huang, who has admitted to an affair with a businesswoman suspected of being a spy for Chinese intelligence, faces a 50-50 chance of being retained by the Nvidia board, analysts say. [Reuters]

After Nvidia CEO Jensen Huang admitted to an affair with a businesswoman suspected of spying for Chinese intelligence, analysts say the Nvidia board is about equally likely to keep him in the role as to remove him.

According to a report Monday (local time) by TechCrunch, Jeffrey Sonnenfeld, a professor and senior associate dean at Yale School of Management who runs the school's CEO Leadership Institute, put the odds of Huang surviving the scandal and salvaging his career at "50-50."

Sonnenfeld said Huang had long commanded extraordinary respect and trust across the technology industry, but that this episode reflected a particularly poor lapse in judgment. "Even if Huang was simply naively deceived, any other Nvidia employee would have been fired for this," he said. "This is an irreparable loss of trust."

Since co-founding Nvidia in 1993, Huang has consistently demonstrated his abilities, accumulating what social psychologists call "idiosyncrasy credits" — a reservoir of goodwill built up over decades of performance that affords a leader more latitude than others when mistakes are made.

Sonnenfeld warned, however, that goodwill can run dry when a misstep appears self-serving or violates a group's core norms. Analysts say this incident crossed that line because it affected multiple constituencies simultaneously: Nvidia's board, the company's 42,000 employees who are bound by security regulations, and the US government, which controls Nvidia chip exports.

A further complication is that Nvidia has no internal succession program or clear line of succession should Huang step down. Huang has said he wants to lead Nvidia for decades more, and the company's organizational structure is unusual — roughly 60 executives report directly to him. Below Huang, the hierarchy is extremely flat. His son, daughter and son-in-law all work at the company, but a family succession plan is far from complete.

For that reason, Sonnenfeld said, a board in crisis might look outside the company for a "savior-type solution" — citing the example of former Google CEO Eric Schmidt.

Even if Huang retains his title, analysts expect he would have to hand over some of his day-to-day decision-making authority. Unlike many other technology companies, Nvidia never granted Huang dual-class shares that would concentrate voting power in his hands. If the board decides to remove him, he would have few tools to fight back.

According to Nvidia's disclosure filed last May, Huang held 871 million shares as of March 23, representing a stake of just 3.58 percent in the company.

Meanwhile, TechCrunch noted that the stakes extend well beyond Nvidia itself. The company effectively dominates the global AI semiconductor market and has acted as a kind of central bank for the AI ecosystem — investing in major players such as OpenAI and Anthropic and backing financial loans. A crisis of control at Nvidia could ripple across the AI industry as a whole.


kate01@heraldcorp.com