Nvidia shares fell more than 10 percent in pre-market trading Thursday as investors reacted to reports that the company’s board is weighing whether to remove CEO Jensen Huang amid revelations of two extramarital relationships, including one with a woman U.S. intelligence officials reportedly believe is a Chinese spy.
According to CNBC, Nvidia stock was down more than 10 percent as of 8:58 a.m. EST Thursday. The company’s shares have now fallen more than 20 percent over the past month, a slide driven largely by the fallout from Huang’s scandal.
The situation unfolded quickly. On Sunday, Huang acknowledged having an affair. Reports identified the other party as Alice Huang, an executive at cloud company Megaspeed, who U.S. intelligence officials reportedly believe is a spy for China. Then on Wednesday, the New York Times reported a second, separate extramarital relationship between Huang and Kimberly Powell, Nvidia’s vice president of health care, who reports directly to him.
CNBC confirmed that Nvidia’s board met Wednesday to discuss whether to remove Huang as chief executive. Some U.S. lawmakers have also called on him to step down. Huang co-founded Nvidia in 1993 and has led it ever since.
Bernstein senior analyst Stacy Rasgon told CNBC’s “Squawk Box Asia” Thursday that the relationship with a direct report has changed the board’s calculus.
“Much tougher for the board to leave him in position,” Rasgon said.
Bernstein cut its Nvidia price target from $400 to $200 the same day. Rasgon also raised doubts about who could replace Huang as the company’s strategic leader.
“Jensen is Nvidia, right? He is the visionary. The reason they’re in the position that they’re in today is because he made decisions 10 years ago. Who is the right person now to make the decisions for the next 10 years? I don’t intuitively know who that person would be,” Rasgon said.
Richard Reyle, chief investment officer at Questar Capital Partners, told CNBC’s “Access Middle East” that Nvidia faces a difficult decision because it has no obvious successor in place.
“Nvidia doesn’t have that person in place, and so it’s going to be either a choice of keeping Jensen and being faced with months and months of being hauled in front of probably congressional boards and things to explain themselves and all kinds of interrogations,” Reyle said.
He said removing Huang would carry its own risks.
“Or they’re going to have to move on from him, and that’s just going to make the stock uninvestable. That doesn’t make the AI trade uninvestable, but it certainly makes Nvidia uninvestable,” Reyle said.
Several Wall Street analysts told CNBC that ousting Huang as CEO could send Nvidia shares down a further 20 percent.
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