How Nvidia's Dependence On Jensen Huang Could Become Big Risk For Investors

Washington: Jensen Huang spent decades building Nvidia into one of the world's most valuable companies and the engine of the AI boom, using a rare talent for winning over politicians, CEOs and dealmakers around the globe. Now, his confession of an extra-marital affair with a suspected Chinese spy has put his position under threat, and the company he built has no public plan for life without him.Huang, the co-founder and CEO, made Nvidia a linchpin of the technological arms race, striking deals to supply cutting-edge chips and financial backstops to everyone from emerging cloud companies to leading AI providers. Huang, 63, has said he doesn't believe in succession planning, saying he wants to cultivate the next generation of leaders so the company could have many potential successors. He runs Nvidia with a flat structure of roughly 60 direct reports, and the board has not publicly named a successor, even as the company's own proxy statement warns that weak succession planning could damage its long-term success. Huang co-founded Nvidia in 1993 and owns 3.6 per cent of the company, making him the largest individual shareholder.'Big Boots to Fill'That dependence on one person and his stature has suddenly become a serious risk for the world's biggest chipmaker. Nvidia shares fell as much as 8 per cent after the board opened an investigation into reports that Huang was the target of a Chinese espionage campaign."If it's true they really don't have much of a succession plan, then that's a problem," David Larcker, a professor of corporate governance and accounting at Stanford University, told The Wall Street Journal.Larcker is expecting the Nvidia board to consult outside advisers and lawyers to make a plan if one wasn't already in place. "It can be difficult to do what's more traditional in companies where you literally have the rock-star CEO or the CEO who literally has control of the company," he said. Larcker, who has studied instances of CEOs having relationships with subordinates or outside contractors, said the current Nvidia predicament stands out because of the national security implications and need for the government to be involved."This is so unusual it's not like you can call somebody up and they say, 'Here's a game plan for this that's very tidy,'" he said. The Investor WarningPer the WSJ report, Nvidia's latest proxy statement has warned that the company was "highly dependent on the services of our longstanding executive team" and that the failure to ensure effective succession planning could "hinder our strategic planning, execution, and long-term success."The Nvidia board has not publicly talked about who would succeed Huang in case he's forced to step down. But analysts fear that even if the company finds someone to replace Huang, it would be difficult for them to fill his shoes. "Jensen Huang is irreplaceable. He's become a singular force in the geopolitics of AI," Jim Secreto, a public-affairs consultant and former deputy chief of staff in the Commerce Department during the Biden administration, told WSJ. Daniel Newman, CEO of tech research and advisory firm Futurum Group, compared his legacy to that of Steve Jobs at Apple. "In many ways Jensen is Nvidia's Steve Jobs. That does not mean they cannot find a Tim Cook in the future, but it would be a massive changing of the guard, and the company has not been set up for that," Newman told WSJ.Huang and Nvidia play a critical role in the artificial intelligence industry, as many of the world's leading AI developers rely on the company's specialised chips to power their systems. His influence in global policy planning is hardly matched. He helped persuade Trump to take a lighter touch on regulating AI, arguing that existing laws could cover any security issues stemming from the technology and that individual companies should behave responsibly with the products they develop and release.Huang also has lobbied Washington to loosen limits on sales of Nvidia chips to China in recent years, winning Trump's approval for selling its H200 chips this year. It's unclear if Beijing would allow Chinese companies to buy those chips in large quantities. Nvidia said in a regulatory filing in August that it has sold only a small amount to China, as such sales are restricted by the Chinese government.The H200 chips are not Nvidia's most cutting-edge models, but they are still advanced. Previously, Huang also lobbied Trump to be allowed to sell Nvidia's less-advanced H20 chips, which were designed to comply with U.S. export restrictions on China.The ControversyHuang -- a singular figure in the technology landscape and one of the world's wealthiest people -- has acknowledged he had an affair, issuing an apology to his wife and to the company in an open letter posted on Nvidia's website. The New York Times reported that US intelligence determined that the woman was gathering information for Beijing.“I support the investigation and will cooperate fully. I love our country and our company. I am committed to protecting NVIDIA and supporting America's national security,” Huang said in his letter.Nvidia announced on Sunday it was conducting an independent investigation into reports that Huang was the “target of a foreign intelligence effort.”According to the New York Times, Nvidia boss has an extramedital affair with Alice Huang, a former executive of a Singapore-based data centre company called Megaspeed International, whose website prominently touts its partnership with Nvidia.