Jensen Huang Just Resigned and Nvidia Has No Permanent CEO. The Last Company That Did That Left Shareholders 17 Points Behind the Market
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Jensen Huang has resigned as CEO of Nvidia (NASDAQ: NVDA), president and a member of its board, effective immediately, the company announced at 8:47 AM ET on Thursday. The board named Colette Kress, Nvidia’s chief financial officer since 2013, who will remain CFO, as interim CEO while it searches inside and outside the company for a permanent replacement, and appointed Harvey C. Jones, a former Synopsys CEO, as its first-ever chair. “Colette has helped lead NVIDIA through a period of extraordinary growth and has a deep understanding of our business, customers, operations and financial position,” Jones said in the announcement. Huang co-founded Nvidia in 1993 and had run it ever since. His resignation came days after he admitted to an affair with a woman U.S. officials suspect of spying for China, which China calls groundless, and a day after a New York Times report of a relationship with Nvidia executive Kimberly Powell and a Wall Street Journal report that the board was preparing to oust him.
Nvidia was at $158.96 in pre-market trading at 8:45 AM ET, down 8.5% from Wednesday’s close and 14.8% below the November 6 close, the last before Huang’s admission. That is about $668 billion of market value gone in a week.
An interim CEO and an open search is the outcome analysts feared most. “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 on Wednesday. The last two big companies that pushed out a CEO over a workplace relationship show why the search matters.
Intel, 2018, and McDonald’s, 2019
Intel CEO Brian Krzanich resigned in June 2018 after an investigation found a past consensual relationship with an employee. Intel had no successor ready, ran on an interim CEO for seven months, and its stock, down 2.4% on the day, was down 8.7% a year later while the S&P 500 rose 8.5%.
McDonald’s fired CEO Steve Easterbrook in November 2019 for a relationship with an employee and named Chris Kempczinski as CEO in the same announcement. The stock fell 2.7% the next day and was up 14.7% a year later, ahead of the S&P 500’s 11.9%.
The first-day drops were under 3% in both cases. Nvidia has already fallen far more than that this week. What separated the two outcomes came later: a ready successor and a healthy business underneath.
What it means for a holder
A holder who had $100,000 in Nvidia at the November 6 close, about 536 shares, has about $85,169 at the pre-market price, a loss of about $14,831. On the Intel path, that stake would be worth about $77,760 a year from now. On the McDonald’s path, about $97,689. Neither history involves a founder who built the company, so the real range is probably wider.
Dan Ives of Yorkville Ives has said Nvidia would be worth 25% to 30% less without Huang. Baird wrote Wednesday that a new CEO was needed to rebuild trust. The market will spend the coming weeks deciding which of them was right.
The decision a holder controls is the size of the position. If Nvidia is more than about 10% of a retirement portfolio, trimming inside an IRA costs nothing in taxes, and trimming in a taxable account turns part of the gain into a tax bill worth knowing before Thursday’s open.
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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.
