Jensen is Out. What Happens to Nvidia (and Your 401k) | Fortune Daily

0:00What happens when the AI boom loses its most important executive? Well, obviously, that is exactly what has happened today because Jensen Huang has resigned as NVIDIA's CEO with CFO Colette Kress taking over on an interim basis. But of course, this is bigger than just one company. NVIDIA is at the heart of the AI boom. It supplies the chips. It helps finance the startups that are powering the global AI race. There are so many layers to this story. Policy implications, what it means for the US-China race, the human reality. Huang's two adult children work in pretty senior positions at NVIDIA. But today, we're focusing on the investor outlook with Fortune's Ali Garfinkel, who has spent the morning frantically speaking to her sources in the know.

0:54She joins me now to unpick how the largest part of our economy, AI, came to be built around one company, and actually more than that, one man. I'm Ellie Austin here in New York, and this is Fortune Daily.

1:17Ali, Ali, Ali, what a morning, what a week. We have - Something's going on? That's what I've heard. Yes, Ali, there is a massive story breaking and you are reporting the hell out of it. Jensen Huang resigned a couple of hours ago. This has been the week of Jensen Huang, the week of NVIDIA. Did you believe at the start of the week that this is how Jensen's story at the company would end?

1:40Allie Garfinkle: Absolutely not. I actually didn't believe it even last night when I was reading the reports that the board was meeting to decide his fate. Eli, he is the ultimate key man in AI. I didn't think until I saw the news that it was actually going to happen. NVIDIA, as you hinted at, is completely built around Jensen Huang. He is one of the co-founders. He has been at the company for over 30 years. He appeared to many people, myself included, too entrenched, too vital to ever be removed. But this week has been unprecedented in so many ways. Give us a perspective on how monumental his resignation is within this structure, this financial structure at the company that I've just described.

2:21Allie Garfinkle: So I've been a financial journalist for about 10 years. I've been covering tech for the better part of that. This is as big a story as I have ever seen. And it has all happened a lot faster than I expected to. I've been talking to people all morning, and there is definitely a sense that there is an NVIDIA after Jensen. Extremely important to say, even though Jensen is the ultimate AI key man, he is the face of NVIDIA, the face of the AI arms race. NVIDIA produces tens of millions of GPUs every year. That's not going to change overnight. However, there is definitely a sense that we don't know what to expect from here in a way that I hesitate to call anything unprecedented, Ellie, in general.

2:58Allie Garfinkle: But we just don't know. This is a multi-trillion dollar question, not just for NVIDIA, but the entire world of NeoClouds and startups and model makers who all rely on NVIDIA GPUs. We're going to come back to that. Do you think Jensen resigned or do you think he was pushed out the door? In my view, it was a combination of both. But my personal guess, just as me, who has no particular information one way or the other, just has watched a lot of these corporate scandals over the years. I believe it is possible an ousting was imminent, and he chose to resign, perhaps to save some face, perhaps to create the possibility for a next act.

3:37Allie Garfinkle: I will say, as we're recording this now around noon, it is possible you and I could be sitting here tomorrow or whatever it is, and it could be a Sam Altman U-turn situation. I don't think that's still off the table. I think there are a lot of things we don't know. But I will say I do believe that if he did, in fact, resign, it was because there was an inevitability. I was going to say to you, is there a way back for him? Is there a route back in a different role? I know this is all hypothetical, but you just touched on it. Yeah, I think that we'll have to see. The reality is he will still be Jensen, right?

4:09Allie Garfinkle: He will still be a rock star in a lot of places. I think a lot of what happens from here does depend on what comes out next. Because again, is it possible he resigned over two affairs? Yes, of course. But that doesn't seem like the full story to me. So his way back, I think, depends heavily on what we learn next. What comes out next. But I think there is probably a way back, if I'm honest. Silicon Valley loves a second act, especially from someone truly so vaunted. And from men, I will say as well. And from men as well. Never forget. No one like a vaunted man who can really make a comeback. There's no one quite like a vaunted man to make a comeback.

4:44Travis Kalanick, for example. NVIDIA has been called AI's central bank. I think you used that term in your reporting earlier this week. Walk us through what that actually means in the circular economy that exists around the company that will be impacted by this resignation?

4:59Allie Garfinkle: Do you have an hour? I mean, the short 90 seconds. So the short version is, yes, NVIDIA provides GPUs. Yes, NVIDIA has CUDA. However, NVIDIA has been a key financier and sort of platform for a lot of financing in AI. Think about it. NVIDIA has backed many, many startups, is an investor in OpenAI and Anthropic, is an investor in a bunch of different NeoClouds. And that's not even starting to get all the private credit sort of ties, the private credit infrastructure, the private equity ties with everyone from Blackstone to Apollo to Goldman Sachs. There are a lot of Wall Street ties. Basically, NVIDIA has been the central bank, the focal point for all of the AI financing for the infrastructure build-out, which, remember, is a substantial portion of the U.S.

5:42Allie Garfinkle: GDP. What we're talking about here is essentially a situation where the man at the top, this is, you know what it actually is? This is an even bigger deal than if Kevin Warsh resigned tomorrow or if Jay Powell resigned tomorrow. This is actually an even bigger deal structurally for the AI boom. Which is almost impossible to imagine. NVIDIA is also one of the largest weightings in the S &P 500, which means that almost every 401k, every retirement account in America owns a lot of NVIDIA without choosing to. So what does that actually mean for your retirement account, for mine, for anyone's listening?

6:18There's a personal financial story to this monumental AI event as well.

6:22Allie Garfinkle: Absolutely. This has reached the family group chat for me. It has. This has reached the Garfinkel family group chat. What are we saying in that? Well, my family is simply shocked and is enjoying some of the memes, I will say. But there is also a sense of what does this mean for 401ks? What does this mean for the United States economy? What does this mean for the global economy? From the 401k perspective, this is something I've written about a lot. We will have to see how much NVIDIA stock tanks. I think it is the sort of thing where, you know, as we sat down here, I saw it was down only 7%, which is a lot if we're talking about a multi-trillion dollar company, don't get me wrong, but it's not the steep decline, especially amid a broader market rally.

6:57Allie Garfinkle: So in terms of that, we'll have to see. Personally, I'm not looking at my 401k today. Right now, you're going to wait a few days. Yeah, I'm going to wait a few days. Anybody who's listening to this, I'd also probably wait a few days. We will have to see. To me, the bigger question about NVIDIA is what happens from here. And does NVIDIA eventually lose some clout? For example, I was talking to somebody recently who basically said, recently as in 40 minutes ago or whatever it is, who basically said to me, look, the market has been evolving to demonopolize NVIDIA for some time in all kinds of ways.

7:29Allie Garfinkle: Without Jensen's leadership, without Jensen's strong leadership, with a leader who comes in who's maybe a little bit more circumspect, will NVIDIA stay big over time over the next five years, 10 years, 15 years? To me, that is ultimately the bigger question. Because there's an argument that Jensen is a real innovator and a new CEO, and we're going to talk about that in a second, might come in who's optimizing more for profit. And that could make the company operate very differently. Or just nervous. Basically, a CEO who comes in who's making, you know, you don't get fired for hiring IBM kinds of calls in the middle of the AI boom as the CEO of NVIDIA.

7:59Allie Garfinkle: That'll fly for a while, Ellie. But will it keep NVIDIA at the top? Seems unlikely. So the board has installed its CFO, CollectCress, as interim CEO. What does that choice signal? And is Kress a caretaker or is she a real candidate for the job full time? So hard to say. I think it is definitely a signal of responsibility. Kress has been there for a long time. Responsibility, continuity, we are moving forward. That earnings call next week is going to be fascinating. What should we be listening out for? I think that they're going to have to come out directly and address what has happened and what the future looks like.

8:36Allie Garfinkle: The thing I will be watching for from Crest particularly is a vision of the future. I sort of want to see her make a push for it as sort of the person who can move forward without Jensen and articulate clearly to the market, to the world really, what that can actually look like. I think we'll have to see. I've been hearing a lot of interesting names. Some people say Lisa Sue from AMD is a natural successor. Others are saying Renee Haas from Arm is a natural successor. There are some strange dark horse names I hear. But the reality is filling Jensen-sized shoes is a pretty tough bill. And he's always spoken about the fact that he didn't really believe in traditional succession plans.

9:13So are there any strong, which seems to have backtracked slightly at this moment, are there any particularly strong candidates within the company right now?

9:21Allie Garfinkle: I mean, Crest seems like the frontrunner, I think is just the obvious thing. That being said, NVIDIA, I think while it doesn't necessarily have a deep bench of executives who are forward-facing in the same way Jensen is, It's funny, we call him Jensen, like Beyonce, right? But it is one of those things where I think there could be some interesting folks who come out of the woodwork in NVIDIA over the next, I would have said the next couple months, but it's going to be the next couple days and weeks. Everything's moving very fast. Faster than I ever would have imagined. So every major AI company, whether it's OpenAI, whether it's Anthropic, it runs on NVIDIA clusters.

9:54As we all know, we've spoken about it a lot on this show, Anthropic is poised for what could be the largest ever IPO. How does this turn of events at NVIDIA impact that IPO?

10:07Allie Garfinkle: It's really interesting. I have been walking around basically asking two questions to every source I can find all morning. What does this mean for startups in a world after Jensen? And what does this mean for the Anthropic IPO that's scheduled for next week? In terms of Anthropic, what I'm hearing is it's still a go. In fact, I had somebody make the case that Anthropic is actually a beneficiary. This is its own conversation. In a way. But Anthropic and Nvidia have sort of a longstanding beef that ties back to Jensen and Dario. The short version is that Dario is a China Hawk, and they have run into quite a bit of consternation around that.

10:46Allie Garfinkle: There is a sense that of all the companies that we're talking about in this equation, maybe no one relies on NVIDIA less than Anthropic. They are building their own chips. There actually aren't that many supply chain concerns. One investor I was talking to this morning sort of said, actually, this is great for them. They actually are more poised than ever to go public next week, which I was surprised by because the thing I have been wondering about is, does this put a damper on the whole AI boom if the face of it is gone? There are, I suppose, though, other faces. There could be. There are other faces and new ones will emerge.

11:18We've talked a lot this week about the China-US AI arms race. How does today impact who wins out of those two countries going forward?

11:29Allie Garfinkle: We don't know yet, Ali. We don't know. I think there is definitely a broader sense that China is poised to win. And I think there is a sort of implicit sense that the absolute scandal that has emerged here ultimately nets out as a win for China. But there's still a long way to go here. Ali, thank you for finding time for us. What does the rest of your crazy day look like? I have to go call a bunch more people. I got to go call some sources. Let's get you to those phones. Ali, thank you for dropping in. Thank you. Staying on the subject of big departures, one star partner walked out the door and less than two months later, a 95-year-old law firm with more than$2 billion in annual revenue crumbled.

12:13Ruth Umo joins me now to explain what, while Gottschall's collapse, means for any business built around just a few big star names. Ruth, we are here to talk about Wild Gottschall, which is a crazy story. The fact that a 95-year-old law firm with over 1 ,000 lawyers and more than$2 billion in annual revenue very recently announced that it was winding down. I think everyone was completely shocked. Walk us through what happened. Yeah, so, I mean, talk about a storied law firm and a collapse that seemingly came out of nowhere So I guess to make this quite concise, had a guy, a rainmaker, and he moved to a rival.

12:56He took about five lawyers, five key partners with him. And it was tumult ultimately after he left. And you saw huge defenestrations across the board. And just about last week or earlier this week, the board voted to essentially dissolve the law firm. Huge shock for the legal industry. Huge shock for Wall Street. I mean, they were truly a giant in the corporate sector. So it just goes to show how much power a handful of folks and institution can hold. And we're talking about Michael Aiello, who was the highest paid partner. He was 20 million dollars. 20 million dollars a year. And he oversaw a corporate practice of 600 people.

13:36Yes. There's some parallels between this story and what we're seeing this week with Jensen Huang Hwang resigning from NVIDIA. And people saying NVIDIA without Hwang is like Apple without Steve Jobs. The whole company was built around this man. How can companies looking at these two examples operate in a way that allows for stars without making their whole infrastructure reliant on them? Yeah. I mean, I think you make a great point, which is that we're certainly seeing parallels. I mean, when a company is synonymous with star talent or one individual, if they leave, What happens to their roster of clients, those relationships, that deep institutional knowledge and expertise?

14:15So I think you have to start, first of all, with a really deep bench. You have to spread the love, so to speak. You shouldn't have just one person who is owning everything. We talk a lot about succession planning. That's usually at the C-suite level. But even beyond that, if you have a CFO, if you have a partner, let's look at a consultant, for instance, or a rainmaker in investment banking, You should also have a number two and three underneath those various functions and those various levels. There should never be a point where if someone leaves, everything that he has built or she has built leaves with said person.

14:50And so I think it really does start with the deep bench and ensuring that those relationships, that expertise is really spread across the board. What happens after the 1 ,200 lawyers who worked at Wild Gottschall? Are there adequate jobs for them out there? I know we're in a difficult job market right now. That's the million-dollar question, especially with AI, for those more entry-level folks. I mean, you look at paralegals, a lot of that work is now going to legal tech AI platforms. Hard to say. I mean, the ultimate hope is that they all find jobs. It's going to take some time. It's a rough job market.

15:21Ruth, thank you. We're going to keep our eye on this story. Absolutely. Thanks for joining us. Thank you. Next up, it isn't just employees at the highest level of companies that are leaving their workplace. According to data, one in three workers currently want to quit their job. Kristen Stoller has the full story. The misconception right now among a bunch of leaders and CEOs is that because the job market is so bad, their employees are going to stick around. However, a new Workday report found that one in three employees actually really want to quit. The other interesting thing is that for every employee that accepts a job offer, two are looking to quit.

15:59Workday says what's driving this retention slide is a mixture of two things. The first being a lack of career progression and the second being a lack of company strategy. Employees don't feel like their company is headed in the right direction or sometimes even any direction. So they're confused. Trust may also be an issue here because Edelman found that employee trust in their colleagues and their CEOs is at an all-time low. Only 61 % think there is room to actually even move up in their company. Even employees who choose to stay at their job aren't happy. Workday found that employees who do choose to stay are less likely to recommend their employer as opposed to previous years.

16:38I think part of the reason for this employee sentiment right now is they're at this really unique moment where they're fearful about AI and how it's going to affect their jobs. But they're also fearful about this current economic climate we're in and political climate. There's a lot of uncertainty. The two of them mixed together creates this really scary environment. I interviewed Workday's Phil Wilburn, who told me that employees already know that their jobs are changing. What they're really looking for is their employers to tell them how and help guide them through this process. So what can HR do?

17:07HR leaders can do a few things. The first being communicate. Be transparent with your employees. Tell them, we hear you, we see you, we also acknowledge that these fears are real. And then lay out a very specific plan of how you're going to help them, what is changing, and why. The other important thing is to give employees agency over their own progression. So things like offering upskilling programs or offering educational programs and ways that you can help them and guide them through this transition are really what's going to improve employee sentiment here. That's it for Fortune Daily. I'm Ellie Austin here in New York.

17:42If you're a man with power, please try to make some good decisions because the entire economy could depend on it. We'll see you next week.

18:04Allie Garfinkle: I'm going to call people and be like, ah, thank you. I hope that was helpful.