NVIDIA CEO Crisis: AI Trade Fallout, Governance and Market Risk

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1:00Morgan Brennan: Jensen Wang's future hangs in the balance. I'm Morgan Brennan, and this is your morning call.

1:09Morgan Brennan: Let's get right to the morning's this morning's news. Shares of NVIDIA and stocks across the AI trade are sinking in the pre-market on reports of NVIDIA's board of directors preparing to remove Jensen Wang as the company's CEO after meeting late into the night last night, according to sources. Now, this after Huang himself confirms an extramarital affair with a suspected Chinese spy earlier in the week. NVIDIA's move, dragging NASDAQ futures lower. You can see NVIDIA is down about 5.5 percent this morning pre-market, but we are off the lows for NVIDIA. It was down double digit percentages last night.

1:43Morgan Brennan: And if you take a look at futures right now, S &P is poised to open down about 19 points. The NASDAQ down 149 points right now, but the Dow is hanging on to gains pre-market, poised to open higher by about 70 points. The Wall Street Journal broke the story on Huang's possible ouster just. But just prior to that, the New York Times was out with its own reporting, saying that Huang had also had an affair with an executive that reports directly to him within the company, so a subordinate. Analysts and investors now considering an NVIDIA future without Huang at the helm. And who could possibly step in as CEO if a successor is required?

2:21Morgan Brennan: Chief Financial Officer Colette Kress, VP of Hyperscale, Ian Buck, seen as top front runners, according to users on CalShe, amid a report that the company has hired an outside firm to help with a CEO search. If we turn back to the stock, though, uncertainty for NVIDIA, Wong's future, and the health of the AI trade, that is prompting a number of analysts to slash their ratings and price targets on the stock, some by as much as 50 percent. And others, including CNBC's own Matt Peterson, asking whether or not NVIDIA, as the sort of central bank of the AI built out has become too big to fail, something we've talked about on the show all week, too.

3:00Morgan Brennan: Let's get to CNBC senior technology correspondent Arjun Karpal in London with more. Arjun, you were the last person to interview Jensen Huang on CNBC on the show not that long ago.

3:14Yeah, you're right, Morgan. And look, at the time I was at the conference called GTC, which is something NVIDIA does around the world. And the euphoria around NVIDIA was very clear. There was merchandise with Jensen Huang's face on it. He was being mobbed by attendees at the conference. He was speaking at not only the keynote, but in Q &As. And there was a lot of excitement around NVIDIA and around Jensen Huang because, of course, he has cemented not just NVIDIA, but also himself at the center of this AI boom through the sales of their GPUs, but also through the numerous investments that NVIDIA has made across the AI ecosystem.

3:48ecosystems, so many different AI companies across the world, including in the US and Europe and elsewhere as well. And that's what makes this story so concerning, I think, for the broader markets is that given how central NVIDIA has been to the AI trade, to this AI story, what does it mean if Jensen Huang is ousted as CEO and who could succeed him? If you think about Jensen Huang's history, he has, since NVIDIA was founded in the early 90s, he has led this company through taking on incumbents to creating what was the GPU designed for gaming to pivoting that to a general purpose computing chip and then becoming the key piece of hardware that is underpinning so much of the AI being developed today.

4:29On top of that, the investments in CUDA, the key software platform that has put NVIDIA in such a strong performance. There is all of this. And to some extent, he's been the hype man for AI. He's been speaking publicly over the last few years about the potentials of this technology, not just about data centers, but about robotics, autonomous cars, all these new areas that AI could transform. And so, again, it goes back to how central this figure has been and who could replace him, to be honest, Morgan. And that, I think, is a big question mark right now for the markets.

4:59Morgan Brennan: It does seem to be a big question mark. You just touched on it. I mean, this is a company under Jensen Wong that has partnered with, backstopped, invested in so many companies across the broader AI ecosystem. You just touched on it, though, but they've also been seeding space companies and robotics companies and quantum companies and sort of all these new frontier technologies that layer on top of this AI ecosystem in the coming years, too. What's really surprising to me, though, Arjun, is the fact that, yes, we're seeing Nasdaq futures lower right now. We're seeing Nvidia stock lower right now.

5:31Morgan Brennan: But in general, I mean, it has not been a drubbing in Asia markets, they turned lower overnight, closed lower. But I mean, the KOSPI is only down fractionally in overnight trading. And Europe's hanging on to gains here, too. So is it safe to say that perhaps some of the pain here, at least in the markets, could be limited?

5:53Yeah, it looks that way as it stands, Morgan. I think if you think about NVIDIA, it's got a runway over the next couple of years in terms of products. And we're still in an environment where there is supply constraints around compute, i.e. these chips. There are so many of these AI companies, hyperscalers, AI labs, neoclouts, who still want to buy NVIDIA chips, which are seen as the gold standard. And so those dynamics are not going anywhere. That demand for compute is still there, and they still want NVIDIA products. And so that's not going away anywhere in the near term. I think the question really, a lot of this is longer term.

6:28If Jensen Huang is ousted as CEO, who takes over and will they have the vision to keep NVIDIA at the forefront of this tech revolution that's taking place? Because, you know, NVIDIA, as I mentioned, under Jensen Huang has undergone all these shifts, but it is in facing ever increasing competition from the likes of AMD, but also custom chips from the hyperscalers and even OpenAI with its jalapeno chips. So the competition is increasing. Does NVIDIA and whoever leads this company, if Jensen Huang does go, have the ability to be able to foresee some of those shifts and keep NVIDIA in a strong position for the future.

7:02Morgan Brennan: Yeah. All right. Arjun Karpal, thank you. And to that point, we have shares of AMD up almost 4 % pre-market. Other semiconductor stocks like Broadcom are higher, but some of those neocloud stocks like CoreWeave and IRON are lower tied to all of this reporting. Let's keep the conversation going. Let's bring in Robert Greifeld, former NASDAQ chairman and CEO, current managing director at Cornerstone Financial Technology Management. He is also a CNBC contributor. Bob, it's great to have you back on the show. I mean, it's so much to get into here. But first, I'd love to get your reaction to some of the reporting we're getting overnight and what seems like any moment now, potentially, we could see an ousting of Jensen Wong.

7:43Well, in times like this, what I like to do is say to myself, what are the actual facts that we know, right? There's so much reporting going on. So the way I look at it, we have three facts out there in the public eye right now. One is the CEO has admitted he had a personal relationship with a customer. Important to highlight customer. And what's interesting to me is late as 2025, where this customer is located in the city-state of Singapore of 6 million people, it represented 22 % of NVIDIA's revenue. So that's a fact out there. The second is you can't deny the board has done a horrible job of succession planning.

8:23Succession planning, very simply, is make sure you take two or three executives and give them more and more responsibility to run larger and larger parts of the company. We have 60 direct reports. That has not happened. The third fact we discovered last night is that the investors would prefer, obviously, for Jensen to stay in place, right? We saw a dramatic reversal of stock yesterday when the stories come out in the Wall Street Journal that they might replace him. So I got those three facts to deal with.

8:55Morgan Brennan: I mean, devil's in the details here, to your point. So we'll just start with that last point you just made. I mean, is there a world in which Jensen steps aside as CEO or from an operating role and stays on as some sort of advisor to be able to help with that succession planning now and basically play a game of catch up? I think that's certainly possible, but what we don't know is substantial. So what the board has to find out in the next days or weeks is, did Jensen lie to them, right? Did he lie to them repeatedly on different topics? We don't know. Were those chips that Singapore inappropriately allocated to them for personal reasons, right?

9:36And there's those and other questions. And I'm putting the whole DOJ, FBI topic to the side. I have no expertise to talk on that. So it's really a question of what relationship Jensen has had with the board. Does he lose their trust basically on lying to them over the years? And obviously, you've got more stories coming out from the Times. So I think it's too soon to say. You know, based on the current state of facts, I'm sure the board would love to keep Jensen in place in some role. Right. His value to the company is quite large.

10:11Morgan Brennan: Dan Ives last night writing in a note that while Jensen is the heart and lungs of the NVIDIA story, the company and its leading edge GPU technology will go on. And it does not change the entrenched position that NVIDIA has in the AI revolution chip arms race. What do you think about that? Do you think that's the case? Because that does seem to be part of the debate here. How much of NVIDIA, the future of NVIDIA, at least in the near term, hinges on the technology itself versus the premium baked into the stock being around the confidence of the man who is considered the AI architect? Well, one is I don't see a premium in the stock.

10:47It trades at a low multiple. So there's no bubble to burst here with respect to the valuation. So that gives you time. I think I'm agreeing with Dan and also disagreeing. So there is a significant portion of NVIDIA, which is I call elevator assets, brilliant engineers who leave the building every day. Right. And so then you have risk, increased risk of losing them. But on the other side of the equation to tie to what Dan was saying is the chip development is pretty much baked for the next two to three years. So if there's a new CEO in, they don't have to make any decisions day one, day 30, day 60.

11:27They have time to really get their footing and come up with their own strategic vision. You're not going to change what is in the development plan for chips that exists today. So I think certainly it would be a loss. But given the nature of the business and the long lead time for these chip developments and the long contractual relationships they have with customers, it would give them certainly room to maneuver.

11:52Morgan Brennan: I mean, given the fact that this has been happening for months now, that NVIDIA has been sort of labeled as the central bank of AI, given all of its partnerships, all of its investments and the like here, whether it's from that standpoint or whether it's just from how large the company is from a weighting standpoint in so many of the different indexes, is there a concentration risk here that this is shedding a light on, too, from a market and investment standpoint? point. Well, what's interesting with the index, and I should speak directly to the Nasdaq index, I think it applies to the S &P. In a sense, you get penalized for being very large, right, where they do a relative weighting of your market cap.

12:34So I think NVIDIA is like seven or eight percent of the Nasdaq 100 or the S &P 500. So clearly large, substantial, but it's not 80 % or 50 % or 40%. So I think from that perspective, the markets can carry on. And the essence of what you're asking is not about the individual CEO, but it comes down to the fundamental question of what is AI going to mean? So to the extent that AI is going to change the world as we know it, the fact that we have an issue at this leading firm right now will be managed and we'll see through it very quickly. to the extent that AI has bubble characteristics, which I don't think it does, then it's that much larger of an issue there.

13:19Morgan Brennan: How does this set us up for an Anthropic IPO next week? Well, I think it takes uncertainty on top of uncertainty there. But I think investors are smart, right? They're going to look to Anthropic as Anthropic. And, you know, NVIDIA, it was likely to lose market share over the next decade because there are competitors. Your prior person mentioned that. There are good competitors showing up. And that's not a good, bad thing for the market. I think that's very good. So if I'm an Anthropic investor, I say, OK, I expected a diversity of chip suppliers over the next decade. I'm not buying Anthropic for today.

14:00And I think as we get to next week, we'll have not a large impact.

14:05Morgan Brennan: Bob Greifeld, it's great to have you on to start the hour and to comb through this evolving and developing story in real time. Yeah, it's certainly interesting. Thank you, Morgan. It's not been a dull year in terms of news, and that continues. Well, let's get a check on the market action around the world. We just touched on it, but we're going to dive deeper with our Steve Sedgwick in London. Hi, Steve.

14:30Honestly, Morgan, that was such a great interview with Bob. You were both fantastic there. I love listening to your brilliant questions and Bob's brilliant answers. I've known the man for 20 odd years. Look, Asian equity is also in the red today as investors continue to watch developments out of NVIDIA and whether the board, as you say, is going to oust Jensen Huang or not, as well as weighing out the potential fallout from the news. Europe is the same story. And I'll just flip to the European boards, Morgan, while I say, look, I've spoken to various C-suite members here in Europe, some of the biggest companies today, and every one of them has a link to NVIDIA.

15:01And it just really goes to your point, which I thought was the key point about the concentration risk, not only on one man, but on one company. Let me give you two or three examples. Firstly, Siemens, one of the biggest industrials on the planet, certainly here in Europe. I spoke to the CEO, Roland Bush. They have loads of opportunities where they work with NVIDIA as well. And Roland Bush saying, look, it doesn't matter who's in the C-suite, we'll continue to work with them as well. But again, a great example of a big European company that is affected by NVIDIA. Then I spoke to Merck, again, not the US Merck, German Merck as well.

15:31And again, they have loads of collaborations with NVIDIA as well. Then I spoke to the CEO just now or the co-founder of Databricks. And again, NVIDIA is an investor. And it just really comes down to your point, Morgan, which is the point that is one company at the epicenter of everything. I'll just get back to where the European equity markets are. As you can see, they are rallying, pushing higher, maybe benefiting from what says here limited exposure to big tech stocks, but not limited exposure to relationships with NVIDIA. Strong corporate earnings today, propping up sentiment with some of those companies, including, I just mentioned Siemens there, rallying really hard because, yeah, record orders on data centers.

16:10The story goes on. Back to you.

16:12Morgan Brennan: Steve Sedgwick, we love you so much. Your passion is unrivaled. Thank you for bringing that to us. A lot more to come here on Morning Call, including how owners of NVIDIA may be feeling this morning and if some of these steep price target cuts may become a reality sooner than later. Plus, what did the board know? When did it know it? And who is responsible? Yale School of Management's Jeffrey Sonnenfeld is here to help answer all of that. I also want to get his thoughts on what's going on at the Commerce Department, too, as we have reporting continuing on that side of this as well. A very busy hour still ahead when Morning Call returns.

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17:29Promotion pricing may be lower than meal pricing. AI is here, transforming how we work, live, and lead. And the women I talk to aren't waiting for the future, they're shaping it. I'm Julia Boorstin, Senior Media and Tech Correspondent at CNBC. This is CNBC Changemakers, where I talk with the female leaders transforming business. as AI reshapes the world. Follow and listen to CNBC Changemakers, women leading in the age of AI, wherever you get your podcasts.

18:01Morgan Brennan: Welcome back to Morning Call as NVIDIA shares fall pre-market here. We're down about five and a half, almost 6%, but we are off the lows that we saw as more news began to break after the bell last night. NVIDIA stock was down as much as double digit percentages last night. And you can see it's affecting other stocks, too. AMD, Broadcom, Alphabet, makers of chips that compete are higher here pre-market. And moving in the opposite direction, this is investors gauge what the future of the AI buildout could look like without Jensen Wong at NVIDIA. Joining me now is Storm Uruk, co-head of the global innovation team at UK-based LionTrust Asset Management.

18:39Morgan Brennan: More than$26 billion under management, counting NVIDIA as the top holding across a number of his managed funds. And also with me, Sarah Kunst, Managing Director at Clio Capital. It's great to have you both here. Sarah, I'm going to kick this off with you because I'm just looking at your notes here. And one of the things that you highlight is a credibility crisis. So how do you see this? If Jensen Wong has been the soothsayer of the AI trade, the fact that he's perhaps made some poor decisions in his personal life that are now affecting his professional one, does that raise questions about how much confidence we should have in what he has said that has mattered to the market?

19:15Morgan Brennan: Absolutely. You know, I think it's one of those things where how he does anything is probably how he does everything. We have given Jensen a tremendous amount of trust over the last few years because he seems to know what he is doing. He seems to understand the round tripping, a lot of the stuff that felt a little risky. No one's shocked to hear that China is getting their hands on NVIDIA chips. Right. And we all thought he was managing that well and that he had good judgment. And now it's clear that at least in some areas of his life, he has terrible judgment. So we really have to assess the blast radius and say, how big does this get?

19:50Morgan Brennan: Storm, what do you think? How big does this get? I mean, given the fact that NVIDIA is a top holding among a number of funds that you manage, does this change how you're thinking about the stock or at 11 times, a multiple 11 times versus 19 times for the S &P? Does it actually potentially at some point here represent a buying opportunity?

20:13Yeah, two really important points there, Morgan, and good morning. Yeah, so the first point is that clearly we're very disappointed about what's developed over the last week. And what we're seeing in the market today is uncertainty about Jensen carrying on as CEO, and we're seeing it again overnight. What we'd like to really encourage the board is to really follow due process and make sure that that really is followed over the next week and two weeks. in terms of the price today and whether or not we're a buyer of NVIDIA on the dip. But we need to see how this unwinds from here and how this plays out.

20:47The market, particularly AI infrastructure, has reset in the last six weeks. And so there isn't a premium baked into NVIDIA or any of the AI infrastructure stocks today. But what we're starting to see, we're starting to see opportunities elsewhere outside of NVIDIA.

21:03Morgan Brennan: I mean, to that point, we did get more downgrades of the stock overnight, Sarah. including Stacey Raskon over at Bernstein. It was pretty closely followed. I mean, he slashed his price target on NVIDIA shares from 400 to 200, 50 percent price cut here. I guess going back to this idea of a blast radius, and we get earnings next week. There's a possibility that he's going to testify on the Hill next week. I mean, there's a number of things we have to get through here. What is going to matter the most? And I guess earnings, I mean, if he's if he's moving out here, you know, how much does that actually catalyze the stock?

21:44Morgan Brennan: I think that, you know, the big question is also just the succession piece. Right. Which is it's not, hey, maybe this guy has really poor judgment and it's time for him and his leather jacket collection to move on. We don't know who would take that spot. Right. He famously has about a bajillion direct reports, TBD, on how many he was potentially romantically involved with. And then there's not really a clear person there or two people who have been groomed to take over. It's certainly not his kids. It's unclear who that would be. And all of his employees are also now incredibly rich. If you're a senior executive who's been there for years, you've taken this ride.

22:23Morgan Brennan: You are probably a billionaire. do you really want to step in and pick up the pieces of this absolute disaster? Which, by the way, there will be questions of what did you know and when did you know it? Because most of this affair reporting with both of these women is seemingly coming from employees inside of the company, which implies that this was an open secret. So do I really trust your number two, if there was one, to be somebody from the inside who was OK with this until it completely melted down? We just showed some of the moves that we're seeing here pre-market on the screen, Storm. I mean, beneficiaries, other losers.

22:59Morgan Brennan: How do you think about now assessing the broader AI ecosystem?

23:07Yeah, so Jensen and NVIDIA really hasn't had a misstep really for three to four years. And it's really become the dominant player in providing silicon into AI infrastructure. and that's been represented both in the earnings that it's generated over the last three years, but also the stock price. As you can see, pre-market, you know, there's a chance here that they're going to start seeding market share to AMD and Broadcom as we're talking about missteps in terms of execution. Look, at the end of the day, we've already had a significant reset in expectations over the last six weeks in this area of the market.

23:42And what we're looking at is actually, you know, what is going to be the clearing events. Obviously, you know, visibility over the CEO for NVIDIA over the next two to three weeks is going to be important. Earnings in the next two weeks from NVIDIA is also going to be important. But for us, it really is the demand side of the equation which really matters. And that's really Anthropics IPO that's coming out soon. It's feeling very oversubscribed and we're expecting the price that it clears at to keep on increasing as the stock market rebounds. And so we believe that the AI infrastructure trade over the next three to six months is really going to be driven by the demand side, not what goes on the supply side.

24:21Morgan Brennan: All right. Thank you both for joining me on this developing story. It's funny, I'm talking about earnings and it feels like it's a lifetime away based on whatever's going to happen here over the coming days around this developing story. Sarah, Storm, thank you. And as we're having this conversation, we did get another price cut on NVIDIA. BMO cutting its price target from$340 down to$240,$240 a share on NVIDIA as well. Well, straight ahead, history in Mississippi. Vice President Vance reported push for fresh Iran talks and Google tapping Asia for more financing. We've got your latest headlines when Morning Call returns.

25:01AI is here, transforming how we work, live, and lead. And the women I talk to aren't waiting for the future. They're shaping it. I'm Julia Boorstin, Senior Media and Tech Correspondent at CNBC. This is CNBC Changemakers, where I talk with the female leaders transforming business as AI reshapes the world. Follow and listen to CNBC Changemakers, Women Leading in the Age of AI, wherever you get your podcasts.

25:32Morgan Brennan: Welcome back. We are checking some of the morning's latest headlines. Vice President Vance is reportedly considering face-to-face talks with one of Iran's hardline leaders in a push to end the war there. This, according to The Wall Street Journal, which says the vice president last month sent the letter about a possible meeting to the secretary of Iran's top security body, who yesterday said there are currently no negotiations taking place. Well, Reuters is reporting that Alphabet's first bond sales in Hong Kong and Singapore pulled in about$5 billion combined in early orders. The report says the strong orders gives the company flexibility to increase its planned financing as it accelerates its AI investments.

26:09Morgan Brennan: And MSCI announcing that it will remove strategy from several of its indexes later this month, this after determining that it more closely resembles an investment fund. MSCI last year proposed excluding digital asset treasury companies whose holdings represent 50 percent or more of their total assets. You could see shares of strategy are down 4 percent pre-market. And Democratic nominee Scott Cullum has been declared the winner of Mississippi's Senate race, defeating Republican incumbent Cindy Hyde-Smith. Democrats now will have at least 55 seats in the Senate, with Alaska's Senate race still too close to be called.

26:48Morgan Brennan: Well, still on deck, why NVIDIA's board glorification of Jensen Huang could open the door to a floor of share flood of shareholder lawsuits. includes Yale School of Management's Jeffrey Sonnenfeld is next to weigh in on that and so much more. Morning Call. We'll be right back. I'm Morgan Brennan. Welcome back to Morning Call. Let's get a check on U.S. stock futures this morning after a pop higher for the major averages yesterday. You can see it's a mixed picture on your screen. Unsurprisingly, this morning, the Dow's actually hanging on to gains. It's poised to open up about 75 points. But the S &P, under pressure, poised to open down about 22 points.

27:25Morgan Brennan: The Nasdaq down 172 points. Why? Well, it's the big story this morning, NVIDIA. Those shares are falling, but off their lows in the pre-market on reports that NVIDIA's board of directors is preparing to remove Jensen Huang as the company's CEO. We're going to have more on that in just a moment. You can see shares of NVIDIA, though, are down about 5.5%, 6%. And you can see other stocks within the tech and AI trade moving in response to that, what are seen as potential beneficiaries, what are seen as companies that may be most at risk, for example, some of the NeoCloud stocks. Let's get a check on what we're seeing in the bond market right now, too, especially as we tee up for another busy day of Fed speak.

28:03Morgan Brennan: I think six Fed officials expected to make public comments today. You can see, for the most part, we are higher across the curve. U.S. 10-year Treasury yielding 4.99 percent. So we're flirting with 5 percent. Again, Fed-sensitive two-year Treasury yielding 4.75 percent. And the 30-year Treasury yielding 5.33 percent. Let's also get a check on what we're seeing in the energy markets as crude prices have come off this week, and that continues here. This morning, WTI still trading with an eight-handle, down about 80 percent, eight-tenths of one percent, she said, right around$85,$86 a barrel. And Brent crude is also down as well, trading around$92 a barrel.

28:44Morgan Brennan: Let's look at global markets. A mostly negative finish in Asia. That's after trading started mostly higher. but really fractional losses here. The Nikkei down about 7 tenths of 1 % and the KOSB down 6 tenths of 1%. And in Europe, you see more green on the screen. Europe, European trading in general this week amid all of the NVIDIA dynamics and what that's done to markets in certain parts of the world, Europe has fared better. That continues here this morning. The DAX is up about 9 tenths of 1%. Let's turn back to this fast-moving development around NVIDIA, sending shockwaves from Wall Street to Silicon Valley, Reports that NVIDIA's board of directors is preparing to remove Jensen Huang as the company's CEO after meeting late into the night last night, according to sources.

29:28Morgan Brennan: Overnight, as news about Huang's possible ouster broke, the New York Times reporting that he had had an affair with an executive that reports directly to him within the company. Speaking to CNBC yesterday on NVIDIA's future and a possible exit by Jensen Huang as CEO, Corweave's CEO stressing the deep bench at the chip giant. nvidia is an extraordinary company right it is not one person it is an extraordinary company there are thousands of people over there that interface with thousands of people at my company every day they they integrate on the technology they integrate on the physical infrastructure they integrate on the networking we we have a close relationship with them up and down the companies.

30:13And they are a great partner. They have been a great partner for us for years. They will continue to be a great partner for us.

30:21Morgan Brennan: A partner, an investor. Corey, we've had very strong results yesterday, but it's under pressure this morning, as we see with other neocloud stocks too. For more on all of this, let's bring in Jeffrey Sonnenfeld, senior associate dean for leadership studies at Yale University, also CNBC contributor. He has two new pieces out on the scandal, including one looking at what comes next for the company, another looking at how NVIDIA's board's worship of Huang could open the door to shareholder lawsuits. I mean, I was getting push alerts on your articles late into the night. I'm not sure you sleep. You also, a number of years ago, penned a book called Heroes Farewell, where you talk about things like succession planning and what happens with CEOs.

31:03Morgan Brennan: I think the term you use is monarchs, actually, in this book. So I do, Just firstly, your reaction to what we're seeing here in real time and who would actually step in for this company, assuming that he is, in fact, ousted. Well, I'm just blown away and flattered that you've read all the material. I've shoveled your way all through the night. So thank you. And it must be we are both drinking the same coffee that the NVIDIA board must be drinking because the reports are that they still haven't broken yet. Maybe they have. But so far, everybody thinks they're still meeting through the night. And yes, these monarchs are a certain type where we do see they often have a stranglehold in a creative business or in the media world.

31:46They're often in retail world. We've seen the Dub Charney situation. If you remember American Apparel, where he used to show up at meetings wearing a sock and the sock wasn't on his feet, but not wearing nothing else. But there are problems where we've seen it in the hospitality. Even McDonald's had this problem. But but the idea of that somebody who get is identified with the company and they co-brand it, so that you almost can't separate them. This is a problem for the company to wrestle with. And yes, shareholders have, a lot of times I'm cautious about shareholder litigation. In this case, with no succession plan, 60 direct reports by intention so that there was no threat to him.

32:24And you also then have, of course, a board where there's nobody equipped to step in. None of them were former CEOs or ever reported to boards of directors and things like that. So they're not known to the outside that these are a lot of problems. And the questions that you were, you know, teeing up before the break. Who knew what, when is Yowl? I mean, here you've got a company that some people say was worth$34 million. People over there in Singapore, I was just on with some Singapore experts, they're telling me it was valued at$4 million, that they were buying in excess of$5 billion of chips.

32:56They knew this, if this was a drug trade, this would be called a mule, that they were a shill for distributing these chips. So this is a great concern, a great risk that the board just didn't ask these questions. And the board was issuing denials even recently, saying that, well, we don't know that these chips are being sent elsewhere. They were. These chips are being found in the military research universities going into weapons in China. So that's just seconds away from going into Russian and, you know, Iranian weapons if it's coming out of China. So serious problems about this board and the sexual conduct issues.

33:34It's not that we're being puritanical here. It's they have a code of conduct. If the CEO is not held to it, then how does it have any credibility for anybody else, both with the customer, who turns out to apparently be a spy, and also employees? And it's sort of like a water over the dam. Once you see a little trickle, then the dam bursts. It breaches when people don't pay attention to these signs.

33:56Morgan Brennan: I mean, above and beyond NVIDIA, to me, it seems like this raises two major questions, to larger stories that will continue despite what happens at NVIDIA with succession planning and as the dust settles. The first one, I think, is this raises key questions about governance. I mean, you've got Anthropic getting ready to go public next week, and they have a really interesting and exotic, maybe not so exotic when you look at Palantir, but governance structure. I mean, similar situation at SpaceX. NVIDIA didn't have quite those shareholder structures. But the idea that you have companies, increasingly large, powerful companies that are tied to founders or CEOs or senior leadership, do we see a pushback by investors and Wall Street and others in terms of some of these governance structures?

34:41Morgan Brennan: Because as we're seeing in real time, there's such risk associated with it. Yeah, there are a lot of times they're beholden. They're smitten by the CEO, kind of idolatry. There are times where I would criticize some of the decisions that Elon Musk would make. And I'd hear from Larry Ellison saying, you know, who are you of dust and ashes to challenge the almighty back when Ellison was still on the board? And he has some of these qualities himself at Oracle is as brilliant as they are. They've taken on a daunting odds. You know, the 99 percent or more people would fail doing what they did. So, of course, we celebrate them.

35:11How it's, you know, Alison will say, can you send a rocket ship a couple hundred thousand miles off into space and land it within inches in the ocean and then reuse that where it's supposed to land? You know, you know, we can't. But still, we can't. I mean, we can't ask them questions. So you often have a board that is very submissive to the CEO. You know, it's been said, Aristotle actually said it. There is no genius without a touch of madness. But it doesn't mean that the whole company has to have that touch of madness. this, somebody needs to ask some questions. And that's that's what's missing here.

35:43Of course, I really worry about what's going on in the government side of this, too. And we have plenty to ask on on the corporate governance side and worried about this company. And you but here you have a company that is selling. They're buying billions of dollars of this stuff. And it turns out, as you just had Bob Greifeld on before the break, and he was reminding us that twenty one, 22 percent of the revenues of this company are going into Singapore, six million people. What's six million people? That's the size of Atlanta or Miami or Philadelphia. That's 22 percent. Nobody's asking questions.

36:18How could Philadelphia or Atlanta or Miami buy 22 percent of the chips that somebody should be asking those questions about, you know, what this what this place was, who they were and in government?

36:30Morgan Brennan: Well, that's it. And that's sort of the next thing I wanted to bring up with you, because that also raises the question about what's going on within the administration. and specifically at Commerce as we continue to have more reporting here. I mean, the Biden administration, according to Wall Street Journal, launched investigations into companies, including Alice Wong's, for diverting U.S. chips to China. Some of those, I think, moves and regulatory steps seem to have been, according to reporting, reversed under the current Commerce Department. And even just last night, you have Axios reporting that Lutnik stalled in Trump's NVIDIA China chip curves after Oval Talks.

37:05Morgan Brennan: and apparently others in the administration going after Lutnik in recent days. To me, it seems like this is actually perhaps the larger story, especially if Jensen Wang wasn't even ever briefed on the fact that he was potentially engaging with a spy, alleged spy. Yeah, that he wasn't briefed and the company wasn't briefed. Now, they didn't do their due diligence. Shame on them. But that the government didn't tell them and President Trump knew this and didn't tell them and that for some reason he was excluded on that trip back in May 15th through 17th to goes to China And he winds up hopping on board in Alaska as a last minute ad because Trump had President Trump had been briefed on this.

37:41And that was going on after a memo came out in March, of course, with with Secretary of State Marco Rubio and coming out of the National Security Council that there's this. This is a problem. This is an espionage ring happening here. That's out in March. And we have a shout out that's widely reported on. Axios has it out this morning with with six very solid sources behind it. nobody denying it, that the Secretary of Treasury Scott Besson had one of his famous or infamous shoutdowns against with Howard Ludnick that was coming close to fisticuffs. Who's in the room with him? The attorney general, Todd Blanche.

38:18Who else is there? The secretary of state, Marco Rubio. And they are not on Secretary Ludnick's side. I'm not sure who is right now, other than perhaps President Trump. We've really got to ask a question in terms of who's on whose side there. Who's on whose side in the United States? This is not a patriotic move to be funding these, you know, diverting these highly sensitive weapons grade artificial intelligence. Artificial intelligence is now even shockingly showing up in North Korean. Now, we don't have Blackwell. Nobody's discovered any Blackwell chips in there or even H-200s. But even North Korea now has guided missiles with that we're seeing with with A.I.

38:53If you were asking this two months ago, weapons people would tell you, oh, no, North Korea doesn't have it. they do, not this particular chip. But this is a huge problem that's got to be asked. And we see that in the government. We certainly have the Senate Banking Committee, of all things, as Senator Kramer and Elizabeth Warren feel that this is their domain. And they're asking some tough questions. And they are calling for, of course, for Jensen Huang to step down already. But it goes into the domain of the Senate Intelligence Committee. And that is a very strong committee. It's Tom Cotton and Mark Warner, who have very different political views, but they function as a team very, very well.

39:34And some of the best people in the Senate are on the Democrats and Republicans on that intelligence committee. We're hearing and talking about, you know, the House is going to get it together on the 18th. The Senate's already working on it. These are a lot of investigations. So it's impossible for a CEO to even if he were being exonerated, that he couldn't do his job with all these investigations taking place. And there's so much here. So, yeah, so much. There are some good people in there, though. The chief financial officer, she's terrific. I think, you know, Colette Kress could be a fantastic leader here.

40:05And the guy who actually created, you know, a lot of people wonder about the software behind it, the Cooper software. It really came from a guy who's Ian Bach, who's very talented. They could be a great pairing. He's the guy really in charge of, you know, the key relationships.

40:23Morgan Brennan: Well, more will be revealed just on it, Bill. I appreciate you being here on set and following the story with us all week. And come back soon. Well, thanks a lot. We'll be right back. It's time for your call sheet. We're going to look at the topics driving the trading day ahead. Crew members today, Stephen Whiting, Sylvia Jablonski, Frank Capillary, all here on set. We had a lot to get to. We're going to get to as much as we can. Stephen, I'm going to start with you. Sure. NVIDIA, where do we go from here? Well, you know, the thing about this is it's not like the Boeing situation or some sort of a product failure.

40:53It is perhaps, and you can't say anything early, but like the loss of a state leader, it is going to have significant effects in the tech supply chain. But I just don't want to think about it as something that's faulty in AI or really computing generally. So it's a little different, again, from something that would happen that would really, again, inhibit the whole technology from working properly.

41:18Morgan Brennan: Yeah, I mean, to that point yesterday, what you saw help fuel a market rally, a market rebound, Sylvia, was strong demand for an anthropic IPO, which we get next week, and CoreWeave results, too. We're going to get nebius this morning as well. So how to balance some of these different counterweights? Yeah, it was actually nice to see the market kind of propel off of the CoreWeave news, the cancellation of the 10B5, and then, you know, just the continued talk about the demand for compute, for data centers, and all of this. And to Steve's point, you know, compute isn't going away. Data centers aren't going away.

41:46Morgan Brennan: So you're going to need chips regardless of what happens. But Nebius, you know, we have that 454 percent year over year growth last quarter. It's, you know, again, talking to the demand of compute. I think if you get a good number here, it kind of brings us back the other way along with CoreWeave and perhaps helps bounce these stocks again. Frank, how closely watching the NVIDIA chart and the technicals here. I mean, we've had we've reported on just this hour. I mean, just a flurry of price cuts from a number of wall-shaped firms and analysts. But the stock is already down something like 22 percent so far this month.

42:16It is actually coming down to a very interesting spot. At 164, if you go back, it was right where kind of bottomed in March. You go before that where it broke out from 2025 and where it peaked in 2024. Throw in a Fibonacci retracement from 2022 low, 2026 high, 38.2 was right there. So we have what we call confluence of support right there. So it's very hard to put blinders on and ignore the news. But if I was a long-term investor looking for a spot to put some money in, this would be an interesting spot to do so technically.

42:45Morgan Brennan: Yeah. We're talking about it in video. We're talking about the AI trade. It's getting a lot of attention for good reason. I mean, this is going to be another big day at FedSpeak, though. We've got six officials on tap. And other parts of the market have been doing really well, too, industrials in particular. You know, are they going to focus in October CPI? This is the whole story. I'll give you November. will probably be a decline in the headline CPI. Now, again, doesn't really change this whole thing. But the fact that the Fed has been so focused on geopolitics, it's just really troubling that it's almost as if the situation in Iran can drive U.S.

43:20monetary policy. And again, I know that there's been a lot that's gone wrong on the inflation front in the last five, six years. But we just have to look a little bit beyond that. And I think that you'll see the biggest thing that I think about, especially on the tech trade right now, is that we've had an immense drop in valuation with earnings growing and share prices stalling. And I know it's not always going to grow this fast, but there's a lot of slowdown expectations, particularly in the tech trade priced in.

43:48Morgan Brennan: Sylvia, I see you nodding your head. Yeah, I mean, we had 84 percent beat on earnings. Right. And you look at a stock like Nvidia, you're talking about, you know, 12x forward versus S &P 500, 18, 19. Right. So a lot of these stocks have actually reset and pulled back. So for investors that didn't get in on the AI hyperscalers and didn't get in on this trade, you know, this could be a time to look at it. And talking about the Fed, you know, whether they do 25 or 50 bps, I mean, it might strain the smaller cap companies, the higher beta firms. But these big, you know, MAG7, strong balance sheet quality companies that have, you know, years of backlog of demand out there, it might be OK for them.

44:22Morgan Brennan: And there might be some discounts here for investors to prey on. OK, we have 30 seconds left. What else are you watching, Frank? Well, market breadth, as you just talked about, industrials. Look back, actually October, 70 % of the S &P 500 stocks were higher. Look right now and sometimes compare the S &P 500 to the equal weight, RRSP, equal ATF. And that one is not going to endure new all-time highs because breadth has been so good. So I think one thing is technology trying to look for bottom. But other areas, financials especially, to come back, percolating near those highs is going to be an important part for the rest of the year.

44:55Morgan Brennan: All right. We're going to leave the conversation there. Thank you so much to our morning call crew. Great having you all here on set too. We did cover a lot. Snoring, gasping for air during sleep, daytime sleepiness. I'm Shaquille O 'Neal, and this shouldn't be anybody's experience. Ask your doctor about ZepBound, her Zepitide, the first and only FDA-approved prescription medicine for moderate to severe obstructive sleep apnea in adults with obesity. ZepBound is a prescription medicine used with a reduced calorie diet and increased physical activity to help adults with moderate to severe obstructive sleep apnea, OSA, and obesity to improve their OSA.

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