Jensen Huang Is Out at Nvidia Over an Alleged Spy Scandal. Holy Hell.

Update (Nov 12): It's done. Nvidia's board announced today that Jensen Huang has resigned as president, CEO, and a member of the board, effective immediately. CFO Colette Kress is interim CEO and will keep the CFO job while the board searches for a permanent successor, looking at internal and external candidates. The board also named Harvey C. Jones as its first-ever chair. Their statement thanked Huang and did not mention the alleged spy scandal. Shares fell more than 10% in premarket trading, according to Reuters and AP. (Nvidia's announcement, AP, CNBC)

The company that built the graphics card humming under my desk just lost its founder. Not over a busted driver update. Over an alleged spy story that reads like a rejected Bond script.

Nvidia's board met late Wednesday to decide whether to oust then-CEO Jensen Huang, a source told Reuters, as reported by CNA. At the time I first wrote this, no decision had been announced. Shortly after this post went up, they had one.

How We Got Here

The New York Times reported that Huang had a close relationship with a Chinese businesswoman who US intelligence officials believed was a spy for Beijing, according to BBC News. Then the Times reported a second extramarital relationship, this one with an Nvidia executive who reports directly to him. The BBC says Huang admitted to being "unfaithful" to his wife and apologised to his family.

Here's the part that has Washington sweating. The Information reported the woman facilitated at least $7.5 billion of Nvidia chip shipments to Chinese firms, about 240,000 H100, H200 and some A100 chips, according to Reuters, which said it could not independently verify those reports. China's foreign ministry called the spy accusations "groundless."

Let's be fair. Huang says he didn't know. Trump said Huang told him he had "absolutely no idea" and that he believed him, Reuters reported. And the BBC notes it remains unclear what, if any, intelligence was allegedly gathered and passed to Beijing.

From Confidence to Panic in Four Days

On November 8, Nvidia's board put out a statement launching an independent investigation. It said the board had "no reason to believe that either national security or NVIDIA secrets were compromised" and that "The Board has confidence in Jensen and his leadership team."

Four days later they were meeting about firing the guy. That's not confidence. That's a rage quit with extra steps.

Under the bylaws, Huang can be removed "with or without cause" by a majority vote of the 11 directors, according to CNA. And the kicker? Huang, 63, has no obvious successor, CNA reported. A roughly $4 trillion company with no obvious plan B. They've named an interim now. A permanent one is still TBD.

Yale's Jeffrey Sonnenfeld put it bluntly to CNA: "They should have had a succession plan." No shit.

Semafor reported some board members favored CFO Colette Kress as interim CEO, though the full board hadn't decided. That's who they named this morning. Bloomberg reported Nvidia hired an outside search firm.

Wall Street Is Bleeding, AMD Is Grinning

Nvidia shed about $430 billion in market value over two sessions, per Reuters. Then shares slid more than 8% in extended trading after The Wall Street Journal reported the company was preparing to fire Huang, CNA said. If that holds, CNA puts the total damage at about $600 billion since the investigation was announced. I don't even have a joke for that number.

Meanwhile, AMD rose 4% and Broadcom 3% in after hours trading, according to CNA. Somewhere, Team Red fans are lighting candles.

What about us GPU buyers? Investors and analysts told CNA that demand for Nvidia's chips is unlikely to drop in the near term. Translation: don't hold your breath for a scandal discount on RTX cards. AMD finally has a real opening here. Let's see if they grab it or fumble it like usual.

Washington Doesn't Look Great Either

The Times reported Secretary of State Marco Rubio briefed Trump about the intelligence in May, though a White House official disputed that, per Reuters. The Financial Times reported several US agencies pushed to put Megaspeed, the Singapore cloud company linked to the woman, on the entity list, but Commerce was delaying it, Reuters said. So the alarm bells were reportedly ringing and somebody hit snooze.

The BBC says Megaspeed is under investigation by Singapore over alleged circumvention of US export sanctions. Nvidia said earlier suspicions about chip diversion were investigated and debunked.

Republican Senator Kevin Cramer told Politico: "The potential for extortion is so tremendous that something as sensitive as Nvidia chips, I just think he's got to go," Reuters reported. Senate Democratic Leader Chuck Schumer demanded answers and tighter export curbs.

And the market already sees new rules coming. Chinese AI companies are trying to rent Nvidia-powered computing capacity at data centres outside China, worried Washington will tighten restrictions on remote access, three people familiar told Reuters.

On top of all that, Huang has been asked to appear at a closed-door briefing for several Congressional committees on November 18 and hasn't said he will, per the BBC. Earnings land November 17, according to CNA. Hell of a week to be in that leather jacket.

So, Did He Need to Go?

Nvidia was founded in 1993 making graphics chips for computer games, the BBC notes. Every one of us who built a rig owes something to what Huang created. I'm not pretending otherwise.

But forget the spy angle for a second. Sonnenfeld told CNA that the relationship with a subordinate alone matters: "This is a fireable offence. Anybody else in the company would be fired for this, let alone the Chinese spy situation." He's right. Rules for the intern should be rules for the founder.

My take: he steps aside, the board owns its own failure to plan, and Washington explains why its export controls apparently had the security of a screen door. Well, the first part already happened.

So argue with me. Did the board get this right, or was the guy who built the company too important to lose? Sound off in the comments.