Nvidia CEO Jensen Huang Resigns; Kress Named Interim

By Edwin V. Christopher

Jensen Huang resigned as Nvidia's chief executive on Thursday, ending a 33-year run at the chipmaker he co-founded after a week of reports about his personal life and a possible national security problem. The board named finance chief Colette Kress interim CEO and opened a search for a permanent successor, just days before the company reports quarterly earnings. Nvidia said Huang left his roles as president, CEO and director effective immediately. Harvey Jones, named the company's first-ever board chair in the same announcement, said directors have full confidence in Kress and expect operations, customer commitments and the product roadmap to continue without interruption. Kress, who has been CFO since 2013, will keep that job while she runs the company, and the board says it will weigh both internal and outside candidates. The trouble began earlier this month, when Nvidia said it had opened an investigation after reports that Huang had been the target of a foreign intelligence effort. In an internal message shared with ABC News on Sunday, Huang admitted he had been unfaithful to his wife and apologized, saying there was no excuse for what he did. The note did not name anyone. Reports have tied the affair to Alice Huang, an executive at Singapore-based Megaspeed International who is not related to him and who is suspected of links to Chinese intelligence. Beijing has rejected the claims as baseless smears. Pressure mounted Wednesday, when The New York Times reported that Huang also had a relationship with a senior Nvidia executive who reported to him. ABC said it could not verify that report. On Thursday, Reuters reported, citing unnamed sources, a relationship with a second employee. CNBC, citing a person familiar with the matter, said the board decided Wednesday night to push him out. Investors reacted fast. Shares fell as much as 13% at Thursday's open before dip buyers pulled the stock back, and Yahoo Finance calculated that Nvidia shed roughly $490 billion in market value between last Friday's close and Thursday's. The stock slipped another 2% Friday to close at $162.85. HSBC cut its rating to Hold, and at least ten analysts have moved from Buy to Hold this week. Some bulls are holding firm. A Wedbush analyst wrote that nothing has changed and still expects Nvidia to beat its forecast. Washington is already involved. House Foreign Affairs Committee Chairman Brian Mast said Huang has agreed to testify before Congress, with the date still being negotiated and a target of Thanksgiving. Mast told reporters he disagrees with Huang on export controls but called Nvidia an important American company and said Huang has serious questions to answer. Separately, the Justice Department is investigating a chip-smuggling campaign linked to Alice Huang and her former company, and Bloomberg reported that federal prosecutors in Manhattan are examining whether groups tied to her helped divert Super Micro products. Reuters also counted more than $3 billion in Chinese computing projects built around restricted Nvidia processors, based on a review of over 150 procurement notices. Nvidia is expected to continue its own investigation. The succession question may matter most. Names circulating on Wall Street include Arm CEO Rene Haas, who the Financial Times says is a possible pick and who once ran a Nvidia business unit; longtime insider Ian Buck, the architect of the CUDA software platform and an early favorite on prediction markets at roughly 40%; and co-founder Chris Malachowsky. The board has not said who it is considering or how long the search will take. Critics say the company never built a bench. About 60 people reported directly to Huang, and former Medtronic CEO Bill George gave the board a failing grade for the lack of a succession plan. The next test comes Tuesday, when Nvidia reports fiscal third-quarter results with Kress on the call. Analysts expect earnings of about $2.47 per share on revenue near $109 billion, roughly double a year ago. Because the company's sales are booked well in advance, Yahoo Finance noted, the turmoil is unlikely to touch this quarter or the next. The harder questions concern pricing power, execution on the product roadmap and whether Washington tightens export limits, a risk the HSBC analyst flagged in his downgrade note.