10AM Hour: Nvidia CEO Resignation: Succession Risk, AI Fallout & Market Impact

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1:05Good Thursday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla and David Faber. We are live at Post 9, as always, from the New York Stock Exchange. NVIDIA CEO Jensen Huang has officially resigned his post following reports of a second affair in one of the biggest shakeups in corporate America's history. Shares are taking a hit, but well off their worst levels of the morning. We've got a packed lineup for you to break down every angle of the story and the impact on the entire market, including NVIDIA investor Jeremiah Buckley, longtime tech expert Ben Baharin, corporate governance expert Dorothy Lund, NVIDIA analyst CJ Mews, Jensen Wang's biographer Stephen Witt, and much more.

1:43All right, let's get straight to it. NVIDIA shares, as you saw, falling, of course, but well off the lows of the session and even more so what we saw in the pre-market. Jensen Wang has officially resigned as CEO. That news coming at right around 8.50 a.m. Eastern time. It's a headline that really would have been unthinkable only a short time ago. Let's get to Sima Modi. She's got the latest on what we know right now. Sima. David, I know we're all on the phone right now, right, trying to figure out how exactly this came about. We're told by a source familiar that NVIDIA's board did decide to meet yesterday, Wednesday afternoon, once the news of the second affair with CEO Jensen Wang came to light.

2:19The meeting began the afternoon, ran late into the evening, ultimately deciding that CFO Klet Kress would be named interim chief executive officer of NVIDIA. Insiders we spoke to describe Colette Kress as knowledgeable, thoughtful, clear-minded. I spoke to someone inside the firm who said Colette doesn't miss a beat. And that said that she and other executives still, though, do not make any big decisions without deferring to Jensen Wang. He always had the final say. Separately, we spoke to two hedge funds, existing shareholders who say they have always been impressed with Kress's ability to translate CEO Jensen Wang's vision into numbers.

2:57Wang often delivers a larger-than-life vision to a room, and then Kress is then able to quickly articulate how that vision impacts the business and the company's pipeline, guys. So this is someone that Wall Street is very comfortable with and one who they know very well. Yeah, it doesn't mean that we're not going to begin and investors won't begin immediately trying to do some thoughts about who might take Colette Kress's place if, in fact, she's not appointed the long-term CEO? See, I offered up a number of names earlier this morning as well, based on at least some early conversations, but I'm curious as to what you're hearing.

3:33One name that does come up often in conversation is Ian Buck, who started and founded CUDA. That is the software stack that NVIDIA launched about two years ago and has allowed the company to really diversify its sort of product portfolio beyond just the GPU, right? He is well-known in the company. He's very well respected. He's someone who I'm told that when Jensen Wong is traveling overseas or is partaking in a conference or in Washington in meetings, Buck will often step in and take those meetings in Santa Clara at their headquarters in California. Is Jensen fully out? Is there no role in the company for him?

4:11No. At this point, he's done. He's out. He is separated from the company. And you'd expect that that might be the case, given all the investigations that are going to be going on, it may be beneficial for the company to be fully separated from him. Others, by the way, made the other argument, though, in some way. But I think that is probably the safer conclusion, that it is a better way to go about this. Well, we've already heard from House Foreign Affairs. The chairman of the committee today says that they spoke Wednesday night with NVIDIA on a date location for him to testify to Congress, which was originally scheduled for next Thursday.

4:44I don't know if the date will stay the same, but that sounds like it's going to happen sooner rather than later. I mean, the national security angles on top of all of this, SEMA, this is a company that's reporting earnings next week. And I think there's still an open question on whether Jensen Wang will be on the call. Based on this announcement, do we expect that he will not at all? No, he will not be on the call. He's no longer associated with the company. True, true. But just given his tenure. Yeah, no, I don't think he could be on the call, right? He's no longer affiliated with the company.

5:15Right. Right. But Kallak Kress is going to have an interesting call for sure to address the leadership vacuum, to address how she plans to. Maybe you put the new chairman on the call. Right. They have appointed a new chairman, which they had not had previously as well. Right. Mr. Jones, I think a lot of questions going into earnings next Tuesday and then, yeah, his role in Washington. All right, Seema, thank you. Seema Modi. Guys, I decided for the discussion to take a look at just how big and important NVIDIA is to our market and to our economy, which makes this obviously one of the biggest stories, as we mentioned, in corporate America's history.

5:53So, so far with the loss, just the market cap losses since it came to light, since Jensen Wong admitted that he had an extramarital affair, we're talking about$740 billion. That was with the 10 % slide today, so we've come off the lows. But, I mean,$2 trillion since October 6, closing high. It just shows you the magnitude of, first of all, the stock and the moves. Basically, this week, NVIDIA lost the economy of Israel or Sweden or Ireland or Singapore. That's how much value was lost in terms of market cap because of Jensen Huang's revelations about his affair. Look, We could also tell you that it has a big market cap.

6:37And because it has a big market cap, it has a big weighting in the S &P, which means that people will feel this. You'll feel this in your 401ks, in your Trump accounts, right? Anyone who has an index fund, here's a chart that looks at the weight of NVIDIA in the S &P 500. Obviously, it was as high as 7.5%. It's come down because the stock has come down into the third most valuable stock in the market now from the first. But people will feel this far and wide if you have any kind of index account, even if you don't realize that you have exposure, you don't want exposure to NVIDIA, just if you have exposure to the S &P 500.

7:11We've also talked about how important NVIDIA has been in terms of its own investments in the entire AI ecosystem into all of these companies and all of the influence it's had. Yes. And here are some of the biggest ones. Yep. You've covered these. I did. I went through some of them this morning. And it's a crucial thing that you're raising there because it's not just the previous commitments. It's the ongoing commitments, in a sense. Some of these investments are expected to be followed up with additional funding, particularly as you get towards the bottom of the list as well when it comes to the likes of some of the up-and-coming companies and the new labs, for example, whether it's reflection AI or Mistral, well, yeah, or thinking machines, Marati.

7:53So, yeah, it's had an enormous influence on the overall ecosystem. Obviously, that capital is already out there. But the question then becomes, well, how much additional capital might not be allocated and then come back to them in the form of them supporting another neocloud or things of that nature. And Jensen was the face of it. I mean, all these deals. He came out with these CEOs one by one on CNBC as these investments were getting done, right? So there are questions there. And then you cannot overstate just how massive they were in terms of, and dominant they were in terms of supplying AI GPUs.

8:30That's their chips that are powering these data centers and everything else. 80 % of global market share of AI GPUs. That's according to the OECD, the big think tank. So it's clearly number one market share, followed by Broadcom, Marvell, and AMD. And just to give you a sense of some of the biggest customers as well, as we talk about just the reach and expansiveness of the NVIDIA ecosystem, Microsoft, historically one of the largest GPU buyers, Amazon, major GPU cloud buyer, Alphabet, of course, for Google Cloud alongside Google's own TPUs. I mean, end market customers like Meta, Oracle, CoreWeave.

9:09It's just so expansive. And when we talk about the circular nature of this economy, NVIDIA very much is at the center of that circle. Yeah. We are seeing, of course, a significant move in a number of the companies that compete with it in terms of developing new chips and trying to stem their reliance overall on those GPUs, given the margins that NVIDIA has gotten, some are between 75 and 80%. And so you are seeing not just AMD shares up, but you're seeing Amazon, which has its training chip up. You're seeing Alphabet shares up a little bit this morning. Of course, they have the TPUs. And as you pointed out, Broadcom shares are up over 4 % right now as well.

9:50Yeah, leading the S &P at the open this morning. Our next guest this morning, I think, has some Nvidia in his portfolio. Jeremiah Buckley joins us this morning, a portfolio manager over at Janus Henderson Equities. Jeremiah, thanks for being with us. All right. So what do we do here? We've had a lot of discussions about succession. There still remains a view that his departure is a net negative for the company. And some argue even this morning it could spark a brain drain of sorts. Where are you on Nvidia today? Yeah. So we've owned Nvidia since June of 2019 when the stock was about$4. So up until the last month, it's been a good ride.

10:29You know, certainly this last week has been disappointing. I think you could argue, given where the stock is, that this could be a clearing event for the company. The stock is now trading at 10 times gap earnings on calendar 27. It's going to generate over$300 billion in free cash flow next year. We think that there is certainly a lot of talent in the company, certainly retention of that talent. It becomes extremely important going forward. But, you know, hopefully the company can turn the page and move forward. So you regard the odds that the demand picture has been mischaracterized by the company?

11:10You view those odds as low? So we think visibility is extremely high for 2027. That demand continues to be really strong. We think the product roadmap is solidified through 2028. So the company's starting from a really good place. As you mentioned, 80 percent market share and one of the most important industries in the global economy. And so they're coming from a position of strength. But obviously, that CEO succession will be very important going forward. Yeah. Tell me how you think about that, you know, in terms of who you would like to see in the job. I'm not saying you have to name names, but at least the skill set that you would like to see.

11:55Yes, obviously we need an executive with incredible tech abilities and innovation, an entrepreneur, obviously somebody who can continue to promote the industry. It's terrific at selling both the industry, the growth of AI, as well as the stack, the system stack that NVIDIA has built over time. And so certainly we're happy with the interim CEO, and we assume that the board will do a rigorous search process. And we encourage them to obviously consider both external and internal candidates. There's clearly a lot of talent that's helped NVIDIA build what they've done over the last number of years.

12:39And so I think it's appropriate to both consider both internal as external. But one thing we've been talking about, Jeremiah, is that it's not just the dominance in ships and in the ecosystem. It's also, you know, Jensen's unique ability to be the top diplomat for the entire industry and in many ways the face of the entire AI revolution, his proximity to the White House and to commerce and to Treasury and really globally. And I do wonder if you could price that, if that's been in the stock, the fact that he was diplomat and chief. So obviously that's been important. I would argue that there are lots of other executives and lots of other talent in the industry that will continue to take the torch and continue to drive the industry forward.

13:31And I think others will step up, including the eventual CEO of NVIDIA. And so we think that the industry will continue to grow. There's clearly demand. When we talk to our companies, we had a meeting with the CFO yesterday in our office talking about the impact of AI on their business. And they're seeing both revenue acceleration as well as internal efficiencies that are driving productivity. And so those examples that we get from companies make us confident that demand for AI is going to continue going forward. and I think there's plenty of talented leaders that will continue to carry the torch.

14:07Yeah, and I don't think people question the overall demand picture, but, you know, who gets a slice of that demand and or whether there is more competition for NVIDIA because perhaps they lack execution that they previously had under Jensen Wong may be a question. There's also a question, I'd love you to get your thoughts, you know, circular financing, right, to the extent they've been financing some of their customers, how much of their order book is a result of that? Will that continue? And we don't really know the answer to how How many chips actually were ending up in China and therefore how important that market was?

14:36Either of those things concern you? Yeah, so our best estimate that, you know, Southeast Asia is around, you know, maybe five to 10 percent of revenues. I think obviously there will continue to be demand there. But again, not not a tremendous amount. There's a lot of additional demand that could soak up some of that if there were some restrictions in the short term. As far as the financing piece, as I mentioned, you know, NVIDIA projected to have over$300 billion in free cash the last next year. They'll continue to be a part of this partner financing. But there are also a lot of large companies that have also stepped up to help drive the growth of the industry and the capital availability.

15:23And so I don't think that ends. And, you know, one could also argue that, you know, maybe a little bit more discipline around, you know, the flow of capital could be good for the industry, given the supply constraints that we've seen. And so I think I think the industry will continue to be able to find capital if the economic value that AI is driving warrants that capital. What do you make finally, Jeremiah, of the notion that the shells, the power generation, the data centers, the places to put the chips is going to run lean? And then you might wind up with not enough places to put those chips coming not so much a 27 story, but maybe 28, 29.

16:05Yeah, I think that's been a continued concern. I think a lot of the companies involved are working very diligently on trying to make sure that they have that capacity. I think companies will find a way to find that capacity, whether it's adding additional capacity outside the U.S. or in different regions of the U.S. And so we believe that it's certainly a challenge. Power is going to be one of the constraints that are going to have to be dealt with if the demand continues to be driven by this economic value creation. But we think companies will find a way and that there's time to adjust. Jeremiah, I really appreciate you coming on, especially with all of our limited knowledge regarding NVIDIA today.

16:47Much appreciated. Thanks so much. Thank you. Jeremiah Buckley, Janice Henderson. We've got much more on the NVIDIA fallout ahead. After the break, longtime tech expert Ben Baharin joins us in his first reaction to this blockbuster news and who he thinks should lead NVIDIA on a more permanent basis. Plus, we're going to talk with a corporate governance expert from Columbia University about the board's handling of this crisis, at least so far. And what may come next. And a slew of downgrades today for the stock. We'll be joined by CJ Mews at Kanner, who says today is, quote, a very sad day. When Squawk on the Street continues.

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18:56Welcome back. NVIDIA shares moving lower this hour. They are off the worst levels of the session as Jensen Huang resigns officially from the company in a stunning shakeup. Former Goldman Sachs CEO Lloyd Blankfein just weighing in on X, writing sad about Jensen, Shakespearean. But as DeGaulle said, the graveyards are filled with indispensable men. CFO Colette Kress has been tapped to serve as NVIDIA's interim CEO, as the company says it will now evaluate inside and outside candidates for a permanent replacement. Our next guest is a tech expert and industry insider. His firm works closely with technology leadership teams.

19:29Joining us is creative strategy CEO Ben Baharin. It's great to have you, Ben. I'm sure your phone's blowing up like ours is. Is it questions about the next CEO or just people in shock about Jensen? Or what are you hearing? Yeah, I think it's both. There's obviously a question of, you know, who could be the logical candidate to run NVIDIA, whether that's an internal or an external candidate. There's a lot of questions about, you know, does anything change in the strategy? You know, how much of the strategy was tied to Jensen's deep convictions about where this industry goes, how they use their balance sheet, what that looked like with their ecosystem.

20:01So I think a lot of that calls into a question, obviously things we don't have the answer for. But I think anytime something like this happens and we observe this, you know, back in the day with Apple when Steve Jobs had cancer and then, you know, inevitably died, it creates a huge shakeup and an impact to the industry. And we're going through that process right now. Well, it sort of reminds me of this of this Blink Fine tweet that post that we just that we just shared. Is he an indispensable man when it comes to NVIDIA and the broader ecosystem? I think the challenge is he was very charismatic.

20:36Anytime you lose a founder level, you know, type of charisma, who really has been looked upon as kind of the trendsetter for the industry, right? The spokesperson for this moment that we have in this technology build out, you know, that's going to be a loss. That doesn't mean that their product roadmap is strong. That doesn't mean that their execution can change. You know, again, Apple is the best comp we have to seeing how new leadership can can grow and scale a company at an operational level. But that doesn't change the fact that there is a culture set that that was set that has to be preserved.

21:08And and that's what we just don't know. Right. It was a little bit easier with Apple. You had some faith in Tim Cook. You know, he'd been there forever. It's different with NVIDIA until we know who takes over. Yeah, I mean, that is a good point. And I saw you posted that as well. the culture setter, CEO as culture setter. You know, we're learning how many roles that CEOs have to have to take on. And it's hard to find, you know, someone that encompasses all of them. You think that Ian Buck is someone to watch? Yeah, I think Ian's been around, you know, really as Jensen's right hand man, he's deeply technical in the weeds.

21:40He understands the business. I think he's been, you know, really one of the front runners in working with all of their customers in the ecosystem. So he has those relationships. So, I mean, I think he's the most logical candidate. I assume that they're going to do, you know, external searches. I know you've had, you know, names thrown around like Johnny Struge from Apple. But I think, you know, again, I think when it comes to a culture, a set of innovation, I think internal candidates are typically best. So I would expect that they look there first. Yeah, I'm curious on that, though. So why do you feel internal candidates would be best in this situation?

22:18Because it is sort of a unique situation to a certain extent. And there are obviously going to be investigations of Mr. Wong in particular over time in terms of national security. I just wonder why you don't think it would be beneficial perhaps to bring in an outsider. I mean, I think there's a few things, right? It's typically harder for an outsider to come in and execute at this level with a company who, again, you have to have deep semiconductor expertise. It can't be somebody outside of the semiconductor industry. And it's just a very short list. Look at what Intel went through in replacing Pat Gelsinger.

22:51It's a very short list of people who can do that at this scale, who has supply chain relationships. Ian has been around in that. It would be speculative to say he's got any ties to anything that went on with Jensen. But just the length of time he's had in industry, growing this company, been there since very, very early days. it makes him the most realistic candidate. And again, because the supply chain, like this industry, semiconductors is very different than many other industries. Typically why you want people who've been in that role and involved in that ecosystem for a long time. You also want somebody who can make sure you keep all the engineers.

23:30I mean, that's the key talent, isn't it? That will go to the future of the company and its success. Agreed. And that goes back to, I think, right, just, you know, Jensen was a person that a lot of people looked up to, right? They wanted to work for this person. There was passion and conviction, right? This is a stressful industry, right? This is a stressful time to work in. And so you got to believe in your leader. And I think that's also, you know, really what's harming here and what they need to bring back is somebody who can normalize things and be that type of person who can, you know, keep the troops aligned, keep them convicted on what they're doing in their engineering and preserve that culture.

24:05Isn't she going to be hounded, though, with concerns about her association with Jensen? Well, in interim, you mean Colette, right? I think there's going to be questions, right, that she'll have to face and anybody, right? I'm imagining this investigation is still being had, both internally. We have things going on with the U.S. government, so that's going to come up. But Colette is right now named as interim. I think the question is who goes on in the long term. And again, everybody's going to have to go through that vetting process, Ian included. But that will be part of the board's due diligence.

24:36One of the concerns is that, you know, in the past under Jensen, the worry was about angering NVIDIA because they had so much leverage over the supply of their chips. I wonder if that now changes or gives customers more room to maneuver, to negotiate terms, things like that. Yeah, I think, right, if you're just talking about the NeoCloud customers, I mean, you've already heard a little bit about them wanting to diversify. Again, we're at a point in time where demand is still so strong that, A, you have to have a product roadmap that can meet that demand. So that's your supply chain, in this case, with NVIDIA, with TSMC.

25:11There's not a lot of candidates that can meet that scale. They were already shipping the most amount of GPUs and compute as anybody out there. Google only the close second, who very timely, is now also selling TPUs, which makes this very interesting. But there are, I think, a set of the ecosystem who might diversify. I think it's going to be very interesting to see what NVIDIA customers do. And any demand profile that happens to NVIDIA ends up going to someone like AMD as a beneficiary. Again, Google has been scaling this, wanting to sell externally. You've heard Amazon talk about selling Tranium externally in that roadmap.

25:45That's all built on the back of Broadcom with the exception of Amazon. So there are people who can hit that demand. But we will see, right? NVIDIA make great products, and those customers will have to choose what's best for their long-term strategy. I guess that gets to the bottom line question, Ben, which is what is NVIDIA's biggest competitive advantage? Is it the technology? Is it the ecosystem it created? Or is it Jensen Huang himself? Yeah. I mean, I think Jensen played a role. But again, this is a strong company with supply chain execution. You have to be able to execute to build these. They still remain the largest full-stack provider of chips.

26:20Soup to nuts, they do everything. You can install it and start monetizing those tokens. You know, AMD is right behind them now at Helios, but they're just starting to scale that product. So I still think product roadmap-wise, they're the best position. But this, again, now comes back to a CEO who can execute that, keep making the best tokens per watt, keep their technical competitive advantage, and, again, more importantly, manage the supply chain. Semiconductor supply chains is very, very hard. This takes a very specific level of expertise and customer relationships, again, with your foundry partners, with your memory providers.

26:52That has to continue. And that's, again, why I think Ian, if vetted well, is well positioned to keep that strategy alive. Ben Baharin, thank you for joining us. Really appreciate the perspective from Creative Strategies. When we come back, the Neocloud, speaking of which, our getting crushed on news, Jensen Wong is out as CEO of NVIDIA. We'll look at the fallout for the company's partners as we did get Nebius results last night. Shares down almost 19 percent. Much more on the unique makeup of the board. Breaking down what comes next with the Columbia Law School professor with some expertise in governance and securities regulation in just a moment.

27:36Of course, we are following that breaking news this morning that Jensen Wong has resigned. He is no longer affiliated with NVIDIA, of course, the longtime CEO, co-founder of the company. Joining us now is CNBC's John Fort. He's followed the company for a very long time. And, of course, Jensen Wong as well. John, your thoughts? Well, David, nothing like this that we've seen before. But this morning, there are three D's that I have in mind that I think are important, not just for investors in NVIDIA, but for the entire ecosystem and maybe for the entire market. Number one is diaspora. Employees and partners are likely to start hedging their bets at this point.

28:19There are employees who have made a lot of money in equity at this point who are often, people are trying to tempt them away into CEO positions or other executive positions into startups. A lot of people stick around because of Jensen Wong. Now that he's gone, they're likely to think more seriously about doing something else. Partners, similarly, who might have been building solely on an NVIDIA stack, believing that they could get allocation because of the stability of NVIDIA and the presence of Jensen, knowing Jensen, now that he's gone, there are probably going to be a lot of partners thinking about, okay, well, we need to build a more diversified stock, have more of a portfolio.

28:58Number two is disruption. Jensen has been at the center of NVIDIA with all those direct reports. He said as many as 60, everything was flowing through him. The board didn't have a chair. He very clearly had picked it. So all of that was flowing through him. Similarly, NVIDIA is at the center of the AI ecosystem, both in terms of the supply that NVIDIA has been sending. Now we're questioning exactly where and for what reasons, but then also the leverage here, which often is guaranteed by NVIDIA chip value as collateral. So what happens there as people start to question NVIDIA's strength? And then finally, distraction.

29:39Remember Microsoft in the late 90s around antitrust. What can happen when a company's brand, a company's employees, a company's resources are shifted away at a key moment to having to defend itself, justify itself, and people are questioning the future of that company. NVIDIA is probably facing that kind of challenge right now as we try to figure out exactly who's going to be leading it long-term, guys. Yeah, you know, John, on the diaspora part of it, I think that's a fascinating point. Do you have any sense or does it point to how important it will be in terms of who actually takes over as the full-time CEO and the allegiance those people might have?

30:18Does it lead you to think maybe we go more internal than external? Yeah, I think external is hugely difficult because I find it hard to believe that Jensen Wong is going to disappear. He's still got everybody's cell phone number. He still knows how to reach everyone. And frankly, they need what's in his head in terms of his connections and his plans to continue running this company. So do you really want to be coming in from the outside, managing a bunch of executives who are all in direct communication with Jensen Wong and who are probably still taking some direction from him? But then on the other side of that, Silla and Charybdis, part of the reason why Jensen said that he managed such a flat organization and didn't specify a succession plan is he didn't want infighting.

31:00Well, now you've got a fourth situation where even if you elevate one or a couple of people, there are a lot of other people who are going to feel like they didn't get the nod. And it then intensifies the case that they can make to themselves and that others can make to them that it's time to go. John, thanks. John Ford on NVIDIA. You know who has some thoughts on who might replace Jensen Wong as the president? For that, we're going to turn to Eamon Jivers. Hey, Eamon.

31:29Talking about with John, and we're getting his first reaction just now over Truth Social, the president posting just moments ago this. He says, now that NVIDIA CEO Jensen Wong, who has done a fantastic job, has resigned, there is only one man to take his place, Tim Cook of Apple. A legend replaces a legend. So the president weighing in here on this succession race at NVIDIA, clearly signaling that he prefers Tim Cook. And the question that immediately comes to mind here, Carl, and we don't know the answer to this, is whether or not the president called Tim Cook to talk to him about this before he posted this for the world to see, or if this is just the president kind of riffing in public his thoughts on a major breaking news story.

32:12We'll try to get some clarity from the White House on his thinking there. Meanwhile, something else to update you on here, guys. Our Megan Kinsella has a statement that she received from a White House official on Howard Lutnick. You remember there's been some controversy and some reporting in Washington about some frustration among some members of the administration with Howard Lutnick's role at commerce and whether he's been slow walking chip restrictions on Megaspeed, that company that Alice Wong was deeply involved with, the paramour of Jensen Wong. This now from a White House official saying Secretary Lutnick is a champion of President Trump's America First trade and tariff policies, which have secured almost 20 fair trade deals and trillions in manufacturing investments.

32:55President Trump maintains complete confidence in the secretary and his ability to carry out the position as the most transformative commerce secretary in modern history. So, guys, a statement of confidence from the president to the secretary of commerce there amid some of this reported infighting. But clearly, when the president has to issue a statement of competency in you, there's already some trouble on the horizon. So we'll watch for all of those factions and that infighting and see if we can get more on that. I'm sure the Democrats will have questions about that. But the other thing, Aiman, that it shows, you know, President Trump weighing in on this, is how critical NVIDIA is as a national company.

33:35You know, when you when you hung around like I was there when President Trump went to Saudi Arabia in May and Jensen, of course, was there as well. He and everyone in the administration called NVIDIA our national champion. They said they have Huawei, we have NVIDIA. And that's our competitive advantage. And the fact that he's weighing in and picking a successor, throwing one out there, I think shows how important of a role this is, not just in terms of leading, you know, a chip maker. Yeah. Look, Sarah, I think that's right. And I think that, you know, to sort of give you the devil's advocate argument on that, I think a lot of free market capitalists would say, you know, a capitalist country shouldn't have national champions, right?

34:15We should let the competition hash itself out and, you know, to the victor go the spoils. And the government shouldn't be the one sort of promoting or demoting individual companies and picking winners and losers like they do in China. Clearly, Huawei is the national champion from the government in Beijing. Here, though, you know, you want to have as wide open a field as possible so that the most successful, innovative people can rise to the surface without the government's heavy hand of sort of favoritism or, you know, picking winners and losers. We'll see. I mean, clearly, you know, the president loves to just weigh in on big moments and big news.

34:52He has a take on just about everything, as you know. So it may not be the case that the president is in communication with NVIDIA's board or has talked to Tim Cook about this. It might just be the president has this idea. He's energized by it and he wants to share it with the world. We'll try to do some reporting on the back end to see how much contact the White House has had with the company and whether they're significantly pushing for this outcome. Or this is just the president offering his thoughts as he watches the coverage, along with all of us, of this jawbreaking development. Yeah, I can tell you, Eamon, it's way too early for the company to be.

35:28Even the board, they just fired their CEO. They are not yet really embarking on that. We did. Tim Cook's name was around last night. You know, it's just been in the conversation, along with, by the way, plenty of other names outside the company. All those we've heard this morning from a couple of experts, you know, maybe they would end up with an internal candidate given certain risks that they would be taking on. But I'd say it's way too early. Well, Tim Cook has replaced a larger than life founder before. He absolutely has. But last I heard, he actually 66 and retired. Exactly. Yeah. I mean, the classic play here is to go for an elder statesman, right?

36:03I mean, you want stability, you want credibility, you want gravitas, all those things. And so that you can see why Tim Cook's name just leaps to the top of that list. But the question I have, and you guys would know this much better than I do, is are there other elder statesmen? If you drew up a list of elder statesmen, who would be the top five? If Tim Cook is number one on your list, who's two, three, four, and five? Because that might be the kind of external candidates that might be. John, you probably have some thoughts about Tim Cook. I've known Tim Cook in the past, and so this is nothing negative about him, certainly.

36:40There is absolutely no way Tim Cook to NVIDIA could work for a few reasons. Number one, the role that Tim Cook is fulfilling now for Apple as executive chairman is very much that elder statesman role to give John Ternus a chance to grow into the CEO role. that it would be a betrayal of Apple or seen as such if Tim Cook were to then go and do that for another company. Number two, I've talked to Jensen about Apple a few times over the years, and I always got kind of a chilly reception to any comparison between NVIDIA and Apple. So the way I would put it is Apple and NVIDIA's cultures are not compatible, and they're not exactly buddies.

37:23And if you think through how their ecosystems work, you can sort of understand why. It should be a bit like suggesting that Bill Gates could go be CEO of Apple in the late 90s. Wouldn't really work very well. And then on the NVIDIA side, if you were to bring in somebody like that with that executive team who is in a business very different from theirs and wasn't particularly chummy with the person who they all reported to, I imagine that would only accelerate a potential exodus. Yeah, which is, of course, one of the bare theses right now on the crux of some of the downgrades this morning. John, thanks.

38:00Our Eamon, thanks. Our thanks to you as well. When we come back inside the corporate fallout, we're joined by a Columbia Law School professor with expertise in corporate governance. Help us look at the unique structure of NVIDIA's board and what the future could hold with Wong officially stepping down.

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39:04Welcome back. We're getting some new developments on the resignation of Jensen Wang over at NVIDIA. Let's get back to Seema Modi with some new details. Seema. Carl, interim CEO of Fleck Crest writing an email to employees in the last hour offering reassurance saying, We recognize that this has been an extraordinarily difficult period, and I want you to know how grateful we are for your resilience, professionalism, and continued dedication. She says you will hear more from leadership in the coming days about our future together, and we will host a company meeting on November 18th, 9 a.m. Pacific time.

39:34So that's one day after earnings. She adds that we play a vital role in building the technology that is powering the AI revolution, and we have important work ahead of us. So let's move forward together. I thought that line was significant. In addition to this, we have a separate letter from Harvey Jones. That's the new chair of NVIDIA's board of directors, also writing a letter to employees, where he showcases his support for Colette Kress, saying, as CFO for over 13 years, Colette has been a key architect of NVIDIA's growth and capital strategy. She possesses a deep understanding. So there you have two letters from Harvey Jones, the new chair, and the new interim CEO, collect Crest to employees this morning, trying to offer a reassuring message, guys.

40:17Okay. Thank you, Seema. For more on the board of directors handling of the scandal and the company's future, let's bring in Dorothy Lund. She's co-director of Columbia Law School's Milstein Center for Global Markets, an expert on corporate governance. You know, nice to have you here, first of all. Thanks for having me. We sat here, Carl, Jim, and I, for example, on Monday morning, taking a look at this board and the conclusion at the time, at least based on their experience was, wow, this is kind of a weak board for at least a company of this importance. I'm curious, though, as to how you would grade them in the days since, given, obviously, the news of the resignation this morning.

40:49Yeah, so I think, you know, the board of directors, its key role is to monitor management and prevent, you know, keep an eye out for huge risks that could threaten the company. And I think, you know, we don't know exactly what's been happening in the past few weeks, what the board's known, what they've been doing. But I think there is a lot of evidence to suggest this board was very deferential to Jensen Wong, right? There was no board chair. There was no succession plan. Five of the individuals sitting on the board, including Jensen, have been on the board since the start. So they have developed very close relationships over this period of time.

41:27And the board has a track record of being quite deferential to him. And, you know, this is the difficult thing when you have a company with a visionary superstar CEO, right? This person is creating a lot of value. They have a big vision. You know, you don't want to rein them in if it's going to be costly for the company, the company, its prospects, its shareholders. And so I think up until this point, the board has been playing that role. So the thing to do would have been to what, elongate the management structure or something else? Well, so if we want to talk about just like good governance practices, I think having a succession plan in place is vitally important, especially when you have one person that's doing so much for the company.

42:14And, yeah, I think, you know, this management structure was quite flat. Right. Jensen had, I think, 60 something direct reports, which is quite unusual for a company of this size. And so, you know, this creates a lot of risk. Right. It is maybe it works. is so long as Jensen is the visionary, you know, guru that's direct at the helm of the company. But when things go south, as we're seeing right now, it can be very, very difficult. I mean, you know, it was unclear, I guess, whether the affair with the Chinese spy was enough to get him fired. But apparently the news of an affair with an employee was.

42:50I mean, you know, we wondered whether this board would even move on news like that. I just love to get your thoughts about what they've done and obviously what they will be doing from here on. They now have a chairman, by the way. So so, you know, this board has clearly been acting quickly and decisively since this information is broken in the scope of it. I mean, what we know are these two incidents. We don't even really know the exact details. Was she a spy? Were secrets compromised? You know, who knows if this will come out and when in the coming weeks. So I don't think we have a full picture of what is known at this time, but it was clearly enough to get the board to move on this and move decisively.

43:32In some ways, this is uncharted territory in that, you know, the only other example I can think of is a board forcing out a really visionary leader. It's if we go back to 2023 when OpenAI forced out Sam Altman, right? For a week. For a week. And we all remember how that went, right? There was mass employee resignations, investor discontent, and he was eventually brought back. In terms of just spectacular lapses of judgment, in terms of CEO affairs or subordinates, there is a track record for that happening for the CEO. That's like a story as old as time. Yeah, it is a story as old as time. It's so cliche.

44:14I can't even handle it. It's so cliche. And, you know, I have to say for somebody who's deemed to be such a genius, you kind of are wondering, how did you get trapped by this scenario? Does any board put up with that? You know, if you look at the data on this, actually, it's more common than not that a CEO will survive an inter-office relationship. Although there's details that matter, right? Like, what does the employee handbook say? Like here, you know, it was not allowed to have this inter-office relationship. I mean, here you also have this added wrinkle of the affair with a potential spy, which again just reveals— For at least a customer.

44:54At least a customer, which I think is also potentially against the rules. Right. It could be against the rules. It also reveals just a really big lapse of judgment. And I think also, you know, you have this moment where, you know, people are kind of looking at, well, what is the government going to do now? We have a national security question. I want to get we have we're running out of time. They are conducting an investigation. Wachtell has been hired. That will continue, one would expect. How important is that? Just give us some sense in terms of your perspective and what's going to happen there.

45:26Well, I mean, he's resigned. So I think for purposes of the company, you know, it's over. Maybe there'll be some questions about could he continue to serve at the company in some other capacity? I think there's an open question about, you know, if more comes out, can he can he go work for another company? Right. You know, you can think about the NFL coaches. Right. That leave, resign under sort of like sketchy circumstances and then go buy their time at some lesser team and some sort of. I don't know. Elon Musk would be an honor to hire him. Yeah, well, he's also their biggest customer, too. Right.

46:02But all right. So we shouldn't. The Wachtell investigation, your opinion, is not of importance any longer. Well, I think it's going to be confidential, right? There's going to be no press release at the end of this. I think the investigations to watch are going to be the ones coming out of Congress and the president's administration. And meanwhile, the board has got to decide on who the next leader of this company is long term. I guess that would be number one on their list. This is the number one thing to figure out right now is who is going to lead this company forward. They have a great interim CFO or their interim CEO, who is their former CFO.

46:33But I don't think she has operational experience that's necessary to move this company forward. And so this is a five alarm fire moment for the board is how do we navigate through this? So to minimize the damage. And yeah, that's the focus now. Dorothy, appreciate your time. Thank you. Thanks. All right. Still ahead, the fallout for NVIDIA's partners and potential benefit for competitors. Plus, a slew of analysts downgrading and cutting price targets for NVIDIA today. We'll be joined by Cantor Fitzgerald, CJ Mews, who calls this a very sad day. We'll be right back.

47:09The options market sending some signals about NVIDIA following Jensen Wang's resignation. Let's get to Oliver Rennick at SIBO in Chicago. Morning, Oliver. Hey, Carl. It's a very busy morning here for NVIDIA options traders trying to price this risk, put a mathematical number onto what is a very qualitative problem. All but the top two 20 of the 20 trades in NVIDIA in the entire market today were NVIDIA, which is really amazing. And a bunch of them were bigger than$20 million. These are monster trades that have been going off all morning. But it has kind of simmered down a little bit. Right out of the gate, people were scrambling, trying to find tail risk hedges, the price of which were soaring.

47:49The price of 30-day, three standard deviation, out-of-the-money puts, betting on big drop-off. We're up 75%, but that's starting to even out. We do see traders taking the other side of what was very high volatility for NVIDIA, the highest implied vol since April. What's interesting, too, is that after yesterday's sell-off, there were very few open options contracts below the 160 strike. So that's kind of why there was this manic dash to buying protection early on this morning. But now the most popular contract today, at least one of them, is the 150 strike put. I literally heard some going off in the single stock pit here on the way over.

48:25But right now, it looks like about as many of those 150 strikes are being opened by sellers as buyers of the puts. So it has even doubt as the price has also stabilized. And of course, next week with earnings puts another big event here onto the calendar for options traders to price. And right now, there's a 7 % implied move, which is the biggest expected swing in NVIDIA in almost two years of earnings, basically over the last seven reports. And then finally, for the bulls, there are some good signs here of some of those really big trades up top today. A few were bullish, namely a$40 million 185 strike call in March that was rolled down to a higher premium$60 million 170 strike call also in March.

49:09So a bull basically holding their position and spending more on it. And then another call spread in which someone bought the 175 strike call also in March for$56 million and selling the 225 strike against it for$13 million. So we are seeing that March contract on the bull side getting a lot of attention. And then arguably, guys, most interesting, S &P just went even on the day. None of this showing up in S &P options. We're back to that 76-20, Oliver, as you mentioned. Thank you, Oliver Renick at CBO watching some options. when we come back. The author of The Thinking Machine, Jensen Wong, NVIDIA, and the world's most coveted microchip is with us.

49:49A closer look at the key man risk on Wong's departure in just a moment. All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such.

50:27To view the full Squawk on the Street disclaimer, please visit cnbc.com forward slash Squawk on the Street disclaimer. Who's ready for a bike ride? Peppa Pig is learning to ride her bike. First, pop on her helmet. Safety first. Then, attach the push stick and give her bike a push. And watch Peppa paddle. Her legs go round and round as the wheels turn. With more than 75 sounds and phrases, every ride is a big adventure. Peppa Pig Ready Paddle Go. Available at all major retailers now.