Nvidia’s Board Is Reportedly Preparing to Oust Jensen Huang. When Intel and McDonald’s Pushed Out CEOs Over Workplace Relationships, Shareholders Got Opposite Results
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Nvidia’s (NASDAQ: NVDA) board is preparing to oust CEO Jensen Huang and could meet as soon as Wednesday night to decide his future, The Wall Street Journal reported at 5:27 PM ET, citing people familiar with the matter. Nvidia has not commented. The report came shortly after a New York Times story that Huang had a relationship with Kimberly Powell, Nvidia’s vice president of healthcare and one of roughly 60 executives who report to him, citing five former employees. That came three days after Huang told employees he had been unfaithful to his wife, following reports that linked him to Alice Huang, a former executive at Singapore’s Megaspeed whom U.S. officials suspect of spying for China. China calls that claim groundless, and Huang has not been accused of a crime.
Nvidia was at $160.95 in after-hours trading at 6:30 PM ET, down 7.4% from Wednesday’s close and 13.8% from the November 6 close, the last before Huang’s admission. A relationship with a direct report turns the board’s problem into one that boards have handled before, and twice in the past decade the CEO had to go. Here is what happened to shareholders those two times.
Intel, June 2018
On June 21, 2018, Intel said CEO Brian Krzanich had resigned after an investigation found a past consensual relationship with an employee, which broke a company policy that applied to managers. Intel had no successor ready. Chief financial officer Bob Swan ran the company as interim CEO for seven months before the board gave him the job in January 2019, while Intel was also struggling to get its next generation of chips into production.
Intel stock fell 2.4% that day, counting from the prior close, while the S&P 500 fell 0.6%. A year later, with dividends counted, Intel was down 8.7% while the S&P 500 was up 8.5%, a gap of 17 percentage points.
McDonald’s, November 2019
On Sunday, November 3, 2019, McDonald’s said its board had fired CEO Steve Easterbrook for a consensual relationship with an employee, which violated company policy. The board named Chris Kempczinski, who ran the U.S. business, as CEO in the same announcement. In August 2020 the company sued Easterbrook, saying he had hidden other relationships, and in 2021 he agreed to return more than $105 million in pay.
McDonald’s stock fell 2.7% the next trading day. A year later, with dividends counted, it was up 14.7%, ahead of the S&P 500’s 11.9%, even with the 2020 crash in between. Six months in, during that crash, both McDonald’s and the index were down: 7.6% and 6.1%.
What $100,000 did in each case
| Company | First day | One year later | S&P 500, same year | $100,000 after one year |
|---|---|---|---|---|
| Intel (Krzanich, 2018) | -2.4% | -8.7% | +8.5% | $91,334 |
| McDonald’s (Easterbrook, 2019) | -2.7% | +14.7% | +11.9% | $114,657 |
The first-day drops were small in both cases, under 3%. Nvidia has already fallen more than that after hours tonight alone. What separated the two outcomes came later, and it was mostly about two things: whether the board had a successor ready on day one, and whether the business underneath was healthy. McDonald’s had both. Intel had neither, and its stock lagged for the year that followed.
Where Nvidia fits
Nvidia has no named successor. “Mr. Huang being removed immediately could be challenging for Nvidia since it does not have a succession plan in place,” Gil Luria of D.A. Davidson told Reuters after the Journal’s report. Huang co-founded the company in 1993 and has run it ever since, which makes him harder to replace than Krzanich or Easterbrook, who were both hired managers. Baird analysts Tristan Gerra and Tyler Bomba wrote earlier Wednesday that a CEO change was growing more likely and that an outside hire would be favored. Dan Ives of Yorkville Ives has said Nvidia would be worth 25% to 30% less without Huang. On the other side, Nvidia’s business is far healthier than Intel’s was in 2018, and a Blind survey found 88% of 232 Nvidia employees want Huang to stay.
For a holder with $100,000 in Nvidia, about 621 shares at the after-hours price, the two histories frame the range. On the Intel path the stake would be worth about $91,334 a year from now; on the McDonald’s path, about $114,657. Neither history includes a founder, so the real range is probably wider in both directions.
The useful question for a holder is the one the board will answer first: whether Nvidia names a successor quickly or leaves the job open. A fast, credible choice was the difference between the two cases above. Until that is known, the position size is the decision a holder controls, and a stake that would hurt at the Intel outcome is a stake worth trimming, preferably inside an IRA, where selling does not trigger a tax bill.
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I've been writing about stocks and personal finance for 20+ years. I believe all great companies are tech companies in the long run, and I invest accordingly.
