Nvidia after Jensen Huang

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0:32Good morning from the Financial Times. Today is Friday, November 13th, and this is your FT News Briefing. What will NVIDIA look like after Jensen Huang's resignation? This is a company that was built by Jensen for Jensen. And how does his departure impact the broader tech industry? One of the things that we should be watching for is how this NVIDIA news affects rival chipmakers, including AMD and Broadcom. Plus, what will this all mean for Silicon Valley and the White House? It's not a good luck for the administration to have been so close to the NVIDIA CEO. I'm Mark Filippino, and here's the news you need to start your day.

1:24Finally happened yesterday. Jensen Huang stepped down from his role as NVIDIA's CEO. The departure came less than a week after it came out that he had an affair with an alleged Chinese spy. On Wednesday, we learned that he also had a relationship with an NVIDIA executive. It goes without saying that this scandal could have massive implications on not just NVIDIA, but also the larger tech industry. Tim Bradshaw has been trying to untangle all this. Hi, Tim. Hi, Mark. So just first things first, NVIDIA's board announced yesterday that CFO Colette Kress will take over as interim CEO from Jensen Wong.

1:57What do we know about her? She has been at the company of the CFO for many, many years and has been very content to play a backseat role to Jensen, who has not just been CEO, but chief marketing officer, chief product officer doing all the deals. It is in many ways a company that was, until yesterday, a kind of one-man show. So Kales is well known to folks in the investor and analyst community, but she's certainly not a familiar face like Jensen has been. You know, I think one of the things that we should unpack here is Jensen Wong's relationship with the board because he was a founding member.

2:34He's been here for 33 years. Sorry, he had been there for 33 years. What was that relationship like? Well, one of the extraordinary things about the NVIDIA board is it had no chair. I mean, we think it is the only company in the S &P 100 that doesn't have a chair. And I think that tells you as much as you need to know about how that board was governed. It was governed by Jensen. And I guess maybe the company is now paying the price for that, for failing to develop a successor or to ask the questions that perhaps they ought to have done when some of the allegations around Jensen's relationship with this Chinese executive and the firm that she worked for started to emerge a few months ago.

3:16And given how close he was with the board, it just shows you the severity of this scandal for them to consider removing him. Again, he did step down on his own accord. What does NVIDIA look like without Jensen Huang, both on the board and for the company more largely? This is a company that was built by Jensen for Jensen. He has dozens of people reporting into him. It very much runs like a startup. It moves very quickly. He clearly has been a pretty fearsome executive inside the company, but still somehow has inspired loyalty among the 42 ,000 people that work there, whose productivity is just off the charts.

3:58I mean, they make an average of$7 million per employee in revenue in the last 12 months, which is like twice as high as the next nearest big tech company. And so it's really hard to imagine anybody running NVIDIA in quite the same way as Jensen has over the last 33 years. And, you know, maybe at this point of its development, after a period of extraordinary growth, it needs a different kind of executive to professionalize it and make it more like a normal company. But I think that probably takes something of what's been special about NVIDIA and has propelled that extraordinary growth and put it at the center of the AI industry, which frankly would not exist, I don't think, without what Jensen had built.

4:38So NVIDIA might look more like a normal company, but what does it mean for the rest of the tech industry? I think for the tech industry that relies on NVIDIA's products, there's going to be fairly little change near term. I think what the AI industry will miss is Jensen's dealmaking. And NVIDIA has spent tens of billions of dollars in equity investments. It has mobilized hundreds of billions of dollars for other investors to invest in AI infrastructure with its backstop guarantees. and it's made multi-billion dollar acquisitions, most recently Hugging Face, which is a platform for open source AI.

5:16That deal is not yet closed. It's not clear whether it will in the current circumstances. And there are other deals in Limbo as well. I mean, they were supposed to be putting$10 billion into Anthropix IPO next week. It's hard to imagine that a CFO stepping temporarily into the CEO role will be as willing to cut such big checks or make such bold bets as Jensen has. So it sounds like Cress is only going to be here for the interim. They're going to find a long-term replacement. Do we have any idea who that is? There are some names in the mix already. René Haas, who's the chief executive of chip designer Arm.

5:50He's a former NVIDIA executive. On the internal side, there is an executive called Ian Buck, who is, from a technological development point of view, one of the most important people at NVIDIA. Whether he wants to take that on, and all of the many regulatory challenges that are likely to come NVIDIA's way over the next couple of years with the Democrats sweeping into power in Washington remains to be seen. The timing of this is pretty spectacular in the sense that on Tuesday, NVIDIA is going to report its quarterly earnings. What are you watching out for there? I think most of the questions that analysts and investors would have had next week have been somewhat answered by the very rapid action by the board or Jensen rather to resign.

6:33but expectations at this point of the AI cycle are very high for NVIDIA to keep delivering the kind of growth that it has. And so with Jensen gone, I suppose investors will really be looking for signs of stability and that there has not been any interruption to NVIDIA's business from this extraordinary drama that has played out at the top of the company. Tim Bradshaw is the FT's global tech correspondent. Appreciate your time, Tim. Thank you very much, Mark.

7:07Nvidia shares, to no one's surprise, fell yesterday as much as 14 % at the opening bell. They did recover quite a bit by the end of the day, though. The rest of the market wasn't as shaken. The S &P 500 and NASDAQ 100 ended the day flat. The FT's Keith Duguid has more. So we have seen two different reactions from two different kinds of investors. At the start of trading on Thursday, we saw a big, big sell-off. And that seemed to mostly be institutional-type investors or driven by more traditional investors who were saying, this is bad. This might not be the end for the AI industry, but certainly NVIDIA is interconnected to a lot of different companies that it was going to have effects beyond just NVIDIA itself.

7:56But then through trading on Thursday, we saw retail investors come in buying the dip. There was a huge amount of volume from these retail investors, and that helped bolster the market. And so where we were left on Thursday afternoon was sort of down a bit, but far, far less than we had been earlier on in the day. Top investors tell the FT that they aren't too worried about NVIDIA without Jensen Huang. But Kate says that even though yesterday wasn't too bad, don't get ahead of yourself. There's likely more volatility on the way. It feels like there's news coming out every single day that moves the markets in a different direction.

8:36I will say that one of the things that we should be watching for is how this NVIDIA news affects rival chipmakers, including AMD and Broadcom, as well as the companies that had a huge amount of exposure to NVIDIA. The other thing to note, though, is that this is coming on the heels of a massive tech sell-off, right? We've seen since the beginning of October a dramatic fall in NVIDIA stock as well as in AI stocks more broadly. You know, that's less about sort of any individual piece of news and more about growing concerns about valuations in AI as well as potential profitability, potential revenue.

9:16And I think that that move looks like it might not be over. That's the FT's U.S. Markets Editor, Kate Duguid.

9:28So those are the ripple effects on the tech industry and markets. But what about U.S. national security? The woman at the center of the scandal, a suspected Chinese spy, Alice Wong, was also an executive at Megaspeed. It's a Singapore-based tech company that's one of NVIDIA's biggest customers. American authorities have been investigating Megaspeed for allegedly violating chip export controls. Our outgoing Washington Bureau Chief James Politi is here to explain what this means for U.S. national security. Hell of a way to cap off a 26-year career at the FT. Hi, James. Thank you. Yeah, it's great to be with you.

10:05And yeah, it's been an amazing run. James, Jensen Wang had huge influence over the Trump administration. He pushed to make it easier to send American chips to China. How might this scandal and his departure influence the way the government approaches export controls? Well, the U.S. has been through a fairly long period of tightening export controls on China. But recently, the second Trump administration has taken a more lenient approach and had been loosening its push to tighten export controls and had given sort of some oxygen to more sales. And so I think that these new developments with NVIDIA certainly will put pressure on Washington to take a tougher line when it comes to export controls towards China, because it sort of highlights the vulnerability of the supply chain potentially.

10:58And I think, you know, any step that will seem to be more accommodating towards Beijing will draw more criticism. In a way, the hawks in Washington have been on the back foot recently, but certainly they will pounce all over this and say, well, this proves that we need to take a tougher line on export controls. And President Trump has the opportunity to say these things in person next week when he visits President Xi Jinping in China. What does the scandal mean for that trip and the relationship between the two countries? It certainly adds an element of drama to this President Trump's trip to AIPAC, which is in Shenzhen, and his meeting with President Xi.

11:40Certainly the U.S. has already warned the Chinese they need to implement kind of aspects of their recent trade truce much more thoroughly than they had in the past. So I think it sets the stage for a more kind of thorny meeting between President Trump and President Xi than we would have expected otherwise. I want to go back to Jensen Huang's resignation itself. What does it mean for the White House's relationship with NVIDIA and big tech more largely? Jensen Huang, NVIDIA, and other tech moguls have been very, very close to the White House throughout this administration. It's an alliance that hasn't served Republicans or the president particularly well at the ballot box, as we saw in the midterms with the backlash against AI data centers and I think AI generally.

12:34But certainly it will draw more attention to the fact that these big tech moguls have very close access to the White House. And in some ways, the White House has given them a very long leash in terms of their sway over American policy. And anytime that there's some kind of development of, you know, along lines of corporate wrongdoing, or in this case, you know, the affair with an alleged Chinese spy, you know, it's not a good look for the administration to have been so close to the NVIDIA CEO. CFT's James Pleady. James, thanks so much for everything and spending your last day with us. We're going to miss you.

13:17Thank you so much, Mark. It's been a pleasure the whole way.

13:26In some non-NVIDIA news, European leaders aren't happy about Russian President Vladimir Putin's diplomatic maneuvers. They don't like Moscow's push to overhaul Europe's security agreements as part of Ukraine peace talks. That comes after the U.S. delegation led by Jared Kushner and Steve Witkoff met with both Ukrainian and Russian leaders this week. It hasn't exactly been smooth sailing. Yesterday, as the talks were going on, Ukrainian President Vladimir Zelensky said his military was facing disruptions to Elon Musk's Starlink satellite service again, making it difficult for Ukraine to intercept Russian drones.

14:02Musk did not respond to a request for comment. On the Moscow side, FT analysis of records leaked from the Russian statistical agency suggests almost half a million Russians now have died since the start of the full-scale invasion of Ukraine in 2022. You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back next week for the latest news from the Financial Times. The FT News Briefing is produced by Safia Ahmed, Sonia Hudson, and Josh Cabrador. I'm your editor, Mark Filippino. Our video producers are Zachary Alfred and Dennis Golan.

14:36Our show is mixed by Alex Higgins, Kelly Gary, and Sam Giovinco. We get help from Vanessa Brown, Michael Lello, David Da Silva, and Gavin Coleman. Our acting executive producer is Charles Bell. Flo Phillips is the FT's global head of audio. and our theme song is by Metaphor Music.

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