The Second Shoe Drops
On Monday, in Jensen’s Schwang, we predicted that Jensen Huang would remain CEO of Nvidia. That prediction now looks likely to be wrong. Here’s our earlier post:
The Wall Street Journal reported Wednesday that Nvidia’s board was preparing to oust Huang after two extramarital affairs, including one with a suspected Chinese spy and another with an employee. The stock plunged in after-hours trading as investors confronted the prospect of losing the founder who built the company.
The second shoe has dropped. From here, we think possible surprises skew to the upside. It’s not like they can fire him twice. A strong successor, a continuing role for Huang, or an arrangement combining the two could give investors something to cheer.
Imagine Lisa Su Taking The Job
Nvidia needs a leader who can command the confidence of engineers, customers and investors. Here’s an audacious possibility: recruit Huang’s distant cousin, Lisa Su, from AMD.
Su has led AMD since 2014. She’s an electrical engineer who ran semiconductor research and development at IBM before joining AMD and becoming its chief operating officer and then CEO. Nvidia would gain a proven semiconductor leader while taking her away from a direct competitor. We could see investors bidding the shares up on that combination.
That’s our proposed solution to the succession problem. Semafor’s Wednesday-night report identified a different outside candidate under consideration: Apple hardware chief Johny Srouji. It also reported that some directors favored CFO Colette Kress as interim CEO if Huang leaves. At that report’s cutoff, the full board hadn’t decided.
An interim appointment would buy time for a permanent hire. A negotiated transition could also preserve Huang’s contribution as chairman or in another substantial role. The board has a business reason to keep his product judgment and relationships connected to the company.
Musk Could Make The Stakes Higher
The alternatives facing Huang help explain that incentive. When Zero Hedge urged Elon Musk to hire him, Musk replied, “That would be an honor”:
Musk didn’t name a company or a job. One proposal circulating on X is to put Huang in charge of Terafab and use his experience to advance Tesla’s AI, robotics and autonomous-driving ambitions. Venu makes the case here.
For Nvidia, the risk would extend beyond filling an empty chair. A founder who attracts engineers and maintains deep customer relationships could help build a formidable competitor. Keeping Huang involved in a workable transition could reassure investors about those relationships as well as the next product cycle.
The China Question Outlasts The CEO Question
Philippe Lemoine offers a useful interpretation of the affair: Alice Huang may have used her relationship with Nvidia’s CEO to advance a private commercial venture. He also argues that the scandal could cripple Nvidia’s ability to lobby for looser China export controls, whatever her motives. Here’s his follow-up:
The distinction matters. The affair and the business dealings require scrutiny; state-directed espionage remains an allegation. In its November 8 statement, the board said it had no reason to believe national security or company secrets had been compromised. Independent directors have since retained outside investigators.
A private commercial explanation could soften the security narrative. Washington could still tighten the rules governing which Chinese customers Nvidia can serve. A leadership settlement and the future of its China business are separate potential drivers of the shares. We’d look for a succession arrangement that preserves the business while the investigation proceeds.
The Next Surprise
Our earlier argument rested on the cost of replacing Huang. Investors are now confronting that disruption. The opportunity from here is a resolution better than the one they fear: a respected permanent CEO, Huang’s continuing involvement, or both. Lisa Su illustrates how a succession announcement could become a positive catalyst.
Our planned bullish Nvidia trade could return about 180% over the next two weeks if the shares stage a modest rebound after earnings next week. You’ll find our trade structure, the maximum price we’re willing to enter it at, and our exit plan below.
If you already own Nvidia and want downside protection, our iPhone app and Basic website let you scan for the optimal hedges given your risk tolerance. Tap or click the illustration below to see the app:
Today’s Event-Driven Trade
Betting on Nvidia bouncing back
RSI: 29; Chartmill Technical Rating: 0; Setup Rating: 3; Fundamental Rating: 9.
