NVIDIA Spy Probe, AI Risks and Market Rally

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1:07Thank you very much, Scott. Maybe not the animation that we thought we would see at 1 p.m. Eastern today. A market rally and look on your screens, a significant one. It's a great day for the major averages, notwithstanding all the turmoil at NVIDIA, which we will get to. I'm Kelly Evans, and welcome to The Exchange. Take a look at these market gains today. The Nasdaq is up 2.5 % after a nearly 4 % drop last week. The S &P is up 2.3 % after its worst week since April of 2025. The Dow's up 1 ,100 points right now. All of this is helped by the final item you see on your screen there, big drop in oil again.

1:41WTI is down to around$87 a barrel. Even the companies more directly tied to NVIDIA are in the green. With chips, memory, and NeoCloud names moving higher, CoreWeave's up about 5 % ahead of its results tomorrow. And Google, Meta, and Tesla, and Amazon, I can't leave that one out. In fact, Amazon, one of the better performers lately, all leading the Mag 7. But in the case of NVIDIA itself, that's where we still see a sharp sell-off. The shares are down about 5 % this hour, though off earlier lows. They were down as much as 8.8 % earlier on. The company's board opening an investigation into the intimate relationship between Jensen Wang and an alleged Chinese spy.

2:20So what information did she gain? Was national security breached? How much did Jensen himself know about her? What did the administration know and when? What does it all mean ahead of the U.S.-China summit in 10 days? And what does it all mean for the most important stock in the AI buildout, a buildout that is said to be driving half of U.S. GDP growth right now? We've got all of those angles covered with our panel of experts today. But let's begin with what we know at this hour. Eamon Javers is live in Washington with the very latest. Eamon? Yeah, Kelly, as you say, far more questions than answers at this hour.

2:54The New York Times reported this morning that the Commerce Department engaged in a months-long investigation into NVIDIA's customer Megaspeed last year, but that effort was closed and the investigation transferred to the Department of Justice. The newspaper also reported that Commerce Department investigators were, quote, alarmed that an NVIDIA official called them to ask about the investigation into Megaspeed and invoked the name of a high-ranking political official at the Commerce Department while doing so. Now, that report adds to the swirl of intrigue around NVIDIA today after a staggering series of sex and spying revelations through the weekend.

3:31President Trump offering some cautious support for NVIDIA CEO Jensen Wang last night after this extraordinary series of revelations. The president said he hopes that everything is fine with a technology executive who's been at his side time and again over the past two years. Now, those comments last night followed NVIDIA's announcement that it has opened an investigation into Wang's relationship with a businesswoman who intelligence agencies say is a Chinese spy. The New York Times reported Friday that officials have concluded that the woman, Alice Wang, who was a top executive, as I say, of that company, Megaspeed, was recruited by the Chinese Ministry of State Security to spy on Wang.

4:10Alice Wang, of course, no relation to Jensen Wang, although they share the same last name. On top of that, the Financial Times reported Saturday that U.S. intelligence agencies believe that Wong and the female spy had a romantic relationship. Jensen Wong releasing a statement Sunday apologizing to his family and his employees, but insisting that he would stay on at NVIDIA. And the company's board saying it was going to launch an investigation, but that it has confidence in Jensen Wong and his leadership team. So as of now, the company, Kelly, is saying that they don't have any indication that any national security information or NVIDIA secrets were leaked to the Chinese in this process.

4:51But, of course, their investigation is just beginning. And that's just one of as many as four investigations that are going to happen into this now. Exactly what I was going to ask. So lay them all out one more time quickly, I mean, if you can. There's four possible investigations, including the board's investigation. And we've heard a lot from Congress people who say that he might be hold in front of Congress now to talk about this. So I don't know if we call that five. Yeah, well, I would call that one of the four. Right. So there's going to be a congressional investigation here. They say they want Jensen Wong to testify in a closed door session later this month.

5:24We'll see if NVIDIA and Jensen Wong agree to attend that. So far, I don't know that any subpoenas have been issued for Jensen Wong, but that could change to compel his testimony. Then you've got U.S. law enforcement who are clearly looking into this. We know from the New York Times today that the Department of Justice has been investigating the mega speed angle of all this. And then, of course, the U.S. intelligence community. What do they know? The implication is that they have surveillance on Alice Wong. And surveillance often means recordings or transcripts, right? So you're going to have transcripts of phone calls or copies of text messages that the NSA and other U.S.

6:03intelligence agencies would have been able to develop. According to the New York Times' reporting, they were surveilling Alice Wong. They discovered that she was having a relationship with someone who was a U.S. national and under U.S. national security law. They can't see the names or identities of Americans who are caught up in this kind of spying. But if they go ahead and get a legal order to unmask that person's identity, they can then see the name. And they found out that it was Jensen Wong who she was having this affair with. So clearly there are text messages, possibly recordings, all of that information still out there.

6:39And there have been some aggressive leaks in this story, Kelly. And I would imagine that there's a lot more to leak if people in the U.S. government feel like they need to do more to draw attention to this issue and certainly to put pressure on Jensen Wong. Right, all of which points to headline risk, if not greater risk than that for the situation. The big question, I was going to say one more thing. The big question here is what percentage of NVIDIA's actual annual sales are represented by pass-throughs to China, right? If there are front companies here, if there are pass-through organizations here that are circumventing U.S.

7:16law and getting these chips to China, is there a material percentage of NVIDIA's annual sales that is represented by that kind of illegal activity? If that's the case, then either this management team or the next management team is going to have to crack down on that. And that's going to maybe impact some significant percentage of NVIDIA sales going forward. Right. And we'll ask our analysts about that in a moment. Eamon, if you could stand by. We appreciate Eamon Javers. Our next guest says Democrats should make investigating the Trump-Wong relationship a top priority when the new Congress takes office in January.

7:50Let's bring in Tusk Ventures' Bradley Tusk. Bradley, it's good to see you. We were just talking about the midterm results now, a very different issue that maybe the midterm results play into. So how are you thinking through this? I think that if you care about the economy and everyone on the show and everyone watching the show clearly does, then you have to say, what will it take to have some measure of faith and trust in that economy? We see that whether it's the yield required to issue debt now for AI infrastructure, or we've paying 15 % or the results of the midterm itself, people don't feel great about where the AI economy stands.

8:27And obviously, when the CEO of the most important company in the AI economy, the most valuable company in the world, turns out was infiltrated by a Chinese spy, if you sweep it under the rug, that's not going to work. So what that means is, one, I think Congress has to apply some pressure to figure out what went on here because it's unlikely the White House will do so. Two, the idea of the Vidya board just picking a law firm and give them a bunch of money and getting the report they want, that doesn't feel credible at all. You need someone to come in who is totally independent and who has just a reputation for integrity and alley-and-a-or-cash or someone like that who isn't beholden to just how much money can get paid for it because otherwise no one's going to trust the outcome and the process.

9:10And the other half is substance. So, for example, there's a bipartisan bill in Congress called the AI Overwatch Act that would require that if chips are going to be sold to countries that are kind of of concern, North Korea, China, Russia, Iran, that Congress gets 30 days notice to try to act on it first. That's really important to pass. I think that Howard Lutnick and Commerce should ban the sale of NVIDIA chips to China right now. Why take the risk? So there are some sort of things that need to happen. But also, usually I'm not a fan of performative politics. But we've got to start doing something to recognize all of the distrust of the AI economy and start fixing it.

9:49Because otherwise, it's just always going to face this massive headwind. I mean, not only do you think that there should be no exports to China of NVIDIA chips, which is a hot enough take as it is, Bradley, but you think he should temporarily step down during the investigation? I do. too and being infiltrated by a chinese spy is a big deal yeah right like they're fair who cares that's his business it's not none of us should care about that at all but like when the chinese government the number one rival to the united states implants someone into the life the personal life of the ceo solely for the purposes of spying on him that's a big problem and maybe can all get cleared up but if what you're concerned about is showing people in the united states that everything is on the up and up and that they can have faith in AI and faith in data centers and want it all to proceed, then you can't keep pretending that there's one set of rules for everyone else and another one for you.

10:41Aben, ironically, your big investigation for CNBC had been about precisely this topic we spoke, what was it, two months ago on the show, and it was about the Federal Reserve official who had had a relationship with what turned out also to be a Chinese spy. Was she not? Well, there were questions about whether she was a Chinese spy, but she was certainly close with Chinese spies. And he, the Fed official, was certainly dealing with a Chinese spy who he thought was his best friend, right? That story was fascinating, Kelly, because it shows you the lengths to which Chinese intelligence is willing to go to get information on the U.S.

11:12economy. They spent over a decade infiltrating the life of a low-level Federal Reserve economist named John Rogers, including a Chinese spy who pretended to be Rogers' best friend in China for a decade or more, and then this relationship with Roger's wife, the Chinese spy facilitated that relationship from the start to finish. If they're willing to do that for an academic inside the Fed, imagine the scale of the Chinese intelligence effort designed to target Jensen Wong and, by the way, all of these other AI CEOs. Every single one of them should be on notice that nation-state intelligence at this level is aimed directly at them, and they had better be pretty pristine in their interactions, both digitally and in person, because they are absolutely targets of this.

12:03We asked Goldman Sachs CEO David Solomon earlier for his take on the situation with Wong. Here's what he had to say. I don't think the ecosystem is centered around one individual. I obviously know Jensen. I think highly of Jensen. I think NVIDIA is a great American company. And I think no matter how this plays out, NVIDIA will continue to be a great and important American company. Bradley, he's striking a more upbeat tone. And you could say that the market reaction so far suggests there's not contagion from this event. And, you know, there's maybe a 10 to 20 percent chance maybe it's greater of him literally stepping down.

12:34You're talking about just stepping aside temporarily and having an independent expert take charge. I just wanted to call out your your kind of final point on this. You don't think Anthropics should IPO in part because of this next week. Yeah. I mean, I don't think Anthropics should IPO in general. Number one, what a company puts in their own S1, that their very existence It represents an existential threat to humanity. That's not a good thing. There's no amount of money any of us could make that would be worth all of us dying. And guess who keeps saying we might all die because of AI? Dario Amodi.

13:07So that's objecting into the pressures of the market in general, I think is really, really risky because he's going to feel a lot of pressure to keep releasing new frontier models because that's where he makes money. And the faster he has to do it, the less oversight and safety there's going to be. and putting himself in that position is a terrible idea. On top of that, one of the biggest partners of any AI company, including Anthropic, is NVIDIA. And if things come out that sent NVIDIA into free fall, you have a company in Anthropic that's already wildly overvalued, facing massive competition from lots of different sources, huge political headwinds in opposition.

13:46And then now their most important partner, maybe in one of the biggest scandals in decades, Just why would you take all of that risk? And I think that while some people believe that it's important to have an IPO happen so that the market can see that there's actual upside is hash to AI. On the flip side, it could also be the thing that burst the bubble because his economic fundamentals are so far removed from his valuation that a quarter or two later when the market realizes this and it plunges, who knows what that sets off? All right. Eamon, a quick last word. Yeah, well, I think what you heard from David Solomon there from Goldman Sachs was that he thinks that NVIDIA is going to be a great American company going forward.

14:25I didn't hear him say that he thinks that Jensen Wang is going to be the CEO of that great American company going forward, though. He had some words of support for Jensen as an individual and as a leader. But the question of can NVIDIA go forward without Jensen, I think, is a real question that's on the table right now. And people are taking a very hard look at that. Everyone should read the Tay Kim book about Jensen. If you think that this is a straightforward matter to replace him as CEO, this company is Jensen. And what he went through to make it the company and become the leader that he was is not going to be easy to replace.

15:01We'll talk more about that a little bit later on. But just so if people, they know, they get the significance of this. But, boy, it's big. Eamon, thank you. Eamon Javers. Bradley, thank you as well. Bradley Tuss. Thanks, guys. Over 310 million shares of NVIDIA have traded today. That's more than double its full 30-day volume, about 116 million. One of our next guests says he doesn't expect the story to change much in the wake of everything that's happened. But the other warns there could be long-term risks to the business and NVIDIA's competitive edge. Let's bring in Doug Clinton. He's the founder and CEO of Intelligent Alpha, along with Jay Goldberg, who's a senior analyst at Seaport Research Partners.

15:39Doug, you think they're going to get through this? Who's they and how? Yeah. Okay. You just mentioned the Tae Kim book, The NVIDIA Way. It outlines really, I think, what makes Jensen Wang a generational founder, which is something we talk a lot about at Intelligent Alpha and my other firm, Deepwater, where we invest in generational founders. They are these N of one unicorns, literally human unicorns. And I think Jensen is that person. That's not a controversial thing to say. The thing I'll say that's more controversial is, yes, this looks very bad. Yes, I think there's probably a 10 to 20 percent chance that Jensen is pushed out as CEO, but I don't think shareholders want it.

16:16I don't think customers want it. And I don't think the American people or the government ultimately want it because he is that important to NVIDIA and the AI ecosystem. And so when these things happen, they do look very bad optically. And when time is allowed to let these things digest, I think sometimes we look at them with a bit of a different lens. I think that's how this will ultimately play out, Kelly. How then, you heard what Bradley Tusk just said, which is that the public is going to want him held accountable. They're going to want, especially somebody who represents AI, which is not very popular, to be held responsible or held accountable in some way.

16:51How do you do that? There could be fines. There could be sanctions. I mean, we've seen for years with other big tech companies, obviously, things around privacy. The EU has been very tough on companies like Google, like Meta. They've been fined numerous times. Maybe we see something like that here. Maybe we see additional sanctions. But I come back to Jensen Wong and his importance to the company and the ecosystem. It's hard to believe that we would want to force him out over this issue as bad as it looks and as bad as it may have been. Because again, I think that he is really important to this company.

17:27I mean, next to Elon Musk or Mark Zuckerberg, it's hard to imagine a more important CEO in the AI ecosystem. Absolutely. And Jay, what about these possibilities, which are that maybe he could step aside temporarily while an independent investigation takes place, or maybe the company should be immediately barred from exporting chips to China or its pass-throughs? So I think I disagree with a lot of those approaches. I disagree with pretty much everything Brad Tusk just said. We can't replace Jensen as the CEO of NVIDIA. He is NVIDIA, right? I defy anyone listening to name two other executives at the company other than him and Colette, the CFO.

18:06So he's the company. He's very important to it. Obviously, he's in some trouble and he deserves the scrutiny he's getting. But at the same time, let's take him for the moment. Let's take him and his board at their word and assume that they're doing everything they can and nothing was breached. Right. If that's the case, then we have to we have to be careful in what we do here. I don't think it makes sense to sort of provoke a wide witch hunt for AI scapegoats. AI is unpopular right now, but that's not necessarily Jensen or NVIDIA's fault. So I'm a little, I feel like a little bit like I want to defend them, but they are absolutely up against it.

18:41No, I'd love to see you flip to a buy. Jay Goldberg goes to a buy after everything that's happened with, I take your point. I appreciate hearing it from you in particular. We've talked a lot about your concerns that they face. And I mean, that's why I wanted to ask you about China, the percentage of sales there directly or through pass-throughs. If that itself just becomes one area of risk, what could it mean for the share price? It is a pretty significant risk, right? Jensen himself has said that 50 % of the AI researchers in the world are based in China. There's huge demand there for AI chips, for NVIDIA chips in particular.

19:11It's very hard to get them in China. We've known for a long time that Chinese entities have been accessing pools of NVIDIA GPUs sold through third parties like Megaspeed in Malaysia and Singapore and other places too. And that's sort of in a gray area around the law. It certainly seems to violate the spirit of it, but I don't think it violates the letter of it. But I think that is going to come under immense scrutiny now. We've always had a lot of questions about roughly 10, 15, 20 % of sales that go to Asia outside of Taiwan for NVIDIA. Where do those actually end up? We have a lot of questions about those, but so far there have been a few investigations.

19:52Nothing has really, even against Megaspeed, nothing has really been proven. What we do know is that Chinese labs have a big demand for NVIDIA chips and they're accessing them through third-party countries. And I think that's going to get a lot tougher given all the scrutiny now. And I think it's very likely that Congress takes a very deep look at this, the new Congress. It certainly seems like the political winds in D.C. have shifted very strongly against Jensen. And that's going to be tough for them going forward. They have a lot of sales in Asia. It's a big number. I mean, that is literally a double whammy for the company, for Jensen Wong, the timing of the midterms and these revelations.

20:30And, Doug, is there anything to that? I mean, I've heard it suggested that the, you know, this was leaked ahead of the U.S.-China summit or this was leaked because of, you know, the politics or something like that. What do you make of the timing? And I've seen the similar estimates, 15, 20 percent and maybe at the high end of their revenues ultimately to China. And is that at risk now? And what what would that do to the share price? I don't believe the timing of these types of things coming out is ever an accident because there's a lot of leverage inherent for people who know these types of information to put them out at the time that benefits them the most.

21:06And so to your point, Kelly, around the U.S.-China summit, this obviously is damaging on the U.S. side. There's issues now that need to be dealt with there. But I think from a revenue standpoint, and what does this mean for NVIDIA, we've always thought that NVIDIA is something like 10 % to 15 % max sort of exposure of chips that are going actually into China that may be at risk. It's kind of how we've thought about the revenue picture. And so a company that will probably do something on the order of$400 billion in revenue, growing high double digits, it is meaningful, I would say, to the revenue, and it would certainly hurt their growth if we had to pull that out of models.

21:45But I think that it would be one of those things that is a one-time issue. And I think there's still a lot of demand from rest of world for legitimate use cases that would continue to show NVIDIA having very high growth even after that is removed. All right, guys, thanks. We'll leave it there for now. Really appreciate you joining us. Doug Clinton and Jay Goldberg with NVIDIA shares down about five and a half percent this hour. Coming up, we'll continue the theme. President Trump said to meet with China's President Xi next week for the third time this year. Will this spy probe cast a shadow over the summit?

22:16What do they think about the timing? We'll get a live report from Beijing. Look at how it's falling on their land next. Plus, NVIDIA's drop won't stop the rest of the market from rallying. All the major averages are up better than 2 % this hour. And we'll look at whether there are any other red flags in this rally that's coming up ahead on The Exchange.

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24:27Come back. NVIDIA is launching an investigation into CEO Jensen Wong's relationship with a businesswoman who U.S. intelligence agencies say is a Chinese spy. And it comes as President Trump is set to travel to China next week to meet with President Xi and potentially with Russian President Putin as well. Eunice Yun is live in Beijing with more. And Wang is a key figure between the U.S. and China. And he was invited at the last minute by President Trump on the previous trip. And now we're curious about whether he'll be coming along, which I can't imagine that he will be, but also how this is playing in China.

25:03Yeah, well, there is an expectation, or at least there was until this weekend, that Jensen Wong could be joining President Trump when he does travel here. All of that, of course, very much up in the air at the moment. But in terms of how it's playing out here, the nickname that Jensen Wong has here is Leather Jacket Huang or P.E. Huang, And he's affectionately known by this name. And the people here have been seeing him as an advocate for China business and a man who has a whole lot of influence on President Trump. He's been able to use that influence with President Trump to get approval for the H200 chip, which is a more advanced chip.

25:47This is after President Trump was I had agreed to ease some of the Biden era export controls for Nvidia chips, which Wong has said had officially gone to zero. Now, the Chinese government has a very conflicted relationship with Nvidia. On the one hand, it understands that its companies believe that the Nvidia chips are superior and that they want them for AI training. At the same time, the government has been directing those same AI companies to continue to use more and more domestic chips in order to have the country at some point eventually quit NVIDIA. So the foreign ministry today had commented on a Reuters report that had said that 600 ,000 of these H200 chips were stuck on a Hong Kong port because the Chinese government had not approved the import of those chips.

26:42The Chinese government had also described the alleged Chinese spy involvement with Huang's affair as a smear campaign. The Global Times, which is a Communist Party paper, has been warning U.S. media not to engage in what it described as hype. And then a pro-China commentator who has been followed for his take on U.S.-China affairs has suggested that this might be some racism against Asian Americans. And this is kind of a playbook that we see by Beijing to present itself as a defender of Asian Americans against racism in order to neutralize criticism within the United states of the Chinese government, when in fact, actually American, Asian Americans are sometimes the most critical of the Chinese government.

27:36Kelly? It's fascinating. Eunice, thank you for now for that report. We appreciate it. Eunice, Eunice in Beijing tonight. Our next guest says this latest development could open the door to more scrutiny from congressional Democrats over the Trump administration's broader handling of NVIDIA and China. Derek Scissors is Asia economist at the American Enterprise Institute. Derek, where do you want to pick up? Well, we'll pick up with that. You know, the Trump administration has known about this since well before the election. I know that because other people have known about it since well before the election.

28:12It comes right after the election, which is very suspicious timing. And it's an invitation to Democrats, whether they want to take it or not, to focus on this, because Jensen Huang has been a very visible, important figure in U.S.-China relations. He's been protected by seemingly President Trump, certainly the Trump administration. And it raises questions about why American policy towards China looks the way it does. I have said for a long time, President Trump is very pro-China. I think it comes from him, but other people may say maybe it comes from undue influence. Oh, who's undue influence?

28:48Well, well, Jensen Huang, who is the kind of person President Trump likes to associate with, very successful, very rich, very outspoken. And then is Jensen Huang being influenced by someone else is now on the table and a reasonable thing for Democrats to investigate. So what happens next? What does this mean for, you know, it's all kind of complex when you stand back and think about it, because the core issue here is whether NVIDIA should not sell as many chips either directly to China, which they're doing a little bit lesser quality of, or through these pass-throughs in other nations helped by companies like the one the mistress was involved with.

29:30Should that not be taking place? And I think asking that question in a way is a little different from the details of what may have to or will now happen here. I mean, you could certainly separate them out and And say, you know, one is strictly a policy question. Should we or shouldn't we give NVIDIA and give China access to, you know, NVIDIA's chips? So I'm just curious what you make of that. Well, I've long been opposed, as many others have, to NVIDIA selling to China. I think it's ultimately a dead end for the company because the Chinese will sub out NVIDIA chips and their future revenue will go to zero.

30:05All we're doing is helping China with their AI systems, which President Trump himself says is the key to the entire competition. And yet NVIDIA has repeatedly been associated with firms smuggling chips to China that it disavows knowledge of. This goes back before the Trump administration. It goes into the Biden administration. Somehow they have escaped any serious punishment. This is, to me, that last part is the key issue for U.S. export controls. You can have export controls on paper and you can say this chip can go and this chip can't go. But when a company violates the export controls and they get away with it, they don't mean anything.

30:41So the main export control issue here is are we going to seriously punish violators? And NVIDIA is at the head of that line. If we get an investigation into Jensen-Hwan that leads to stronger U.S. export controls, that's a policy win. I would argue, possibly we have to go here, but that it's better for NVIDIA and for the U.S. to make them reliant on our technology, you know, kind of like we've been reliant on their manufacturing for so long. Would we just be encouraging them to deep seek it and come up with a different way to do things? Is it better for us to try to be enmeshed deeply into what they're working on?

31:20They have explicitly said at the highest level by Xi Jinping himself, they're going to try to move away from American technology. Jensen Huang is aware very clearly that the Chinese want to sub out NVIDIA chips and stop using them. The idea that they're going to somehow accidentally become dependent on us is ridiculous. It's a nice goal. It will never happen. Jensen Huang knows that. NVIDIA knows that. The Chinese certainly know that. That can't be part of the calculation. We have to go, but I'm not saying accidentally. I'm saying intentionally hook them on. And I just think about, for instance, car engines before the electric era.

31:58You know, the Germans were excellent at a diesel engine and the Chinese couldn't necessarily imitate it. There are some technologies that are actually very, very difficult to do and to do as well as the leading people in the world do them. And maybe there is actually an argument that NVIDIA's chips, because they are still so much superior, hamstring China from developing kind of their own models in the meantime. But I take your point. You think, no, they can do both things at once, basically. Xi Jinping would rather have less advanced technology that's Chinese than more advanced technology and be dependent on America.

32:31That's a very clear point. You might be right with a different Chinese leader, not with the one we're facing. All right, Derek, thank you. Appreciate it today. This will be the heart of the issue one way or the other. Derek Scissors joining me from AEI. Coming up, what is NVIDIA without Jensen Wong? There's no formal president among the company's current executive team. We'll ask Yale School of Management's Jeffrey Sonnenfeld about that. He says the spy probe signals big trouble on three levels. We'll walk through them ahead.

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34:33Welcome back to The Exchange. I'm Mackenzie Sigalos with your CNBC News Update. Defense Secretary Pete Hegseth says that he's not worried about impeachment as Democrats push to force a vote over his handling of the Iran war. Hegseth has dismissed the effort as political, while some Republicans say they are still weighing whether his conduct warrants impeachment. Hegseth is expected to face reporters at a Pentagon press conference tomorrow as scrutiny intensifies following the midterm losses. The head of the Justice Department's civil division has resigned, Attorney General Todd Blanche said today.

35:06Brett Schumate's departure is the latest in a series of senior DOJ exits following last week's midterm elections, adding to a significant leadership shakeup at the department. And France is blaming Iran for last month's cyber attack on supermarket refrigeration systems. The French foreign ministry said today it summoned the Iranian ambassador over the incident. France condemned what it called unacceptable actions carried out on its territory against French interests. The attack disrupted refrigeration systems at supermarkets, causing food to spoil and disrupting store operations. Kelly, sending it back to you.

35:41All right, Mackenzie, thank you very much, Mackenzie Sigalos. Coming up, we're continuing to track this huge market rally. Yes, huge rally today. Two-thirds of the S &P is above its 50-day moving averages. All the major averages are up 2 % or more. Can you trust the rally? Will there be more contagion from you-know-what? That's next.

36:04Stocks are rallying broadly outside of NVIDIA today. A 4 % drop in oil prices helping. Is oil the bigger driver of the market action, or were we due for a rebound after last week's sell-off? Let's ask Matt Miskin. He is the co-chief investment strategist at Manulife John Hancock. going into the weekend before all the Jensen Wong revelations. Matt, how are you thinking about the market and what do you make of this big move today? We're looking at opportunities to nibble at this market and we think there could be more downside. We want to be careful because the market can certainly spring ahead here and you could see days like this.

36:37As soon as oil can drop or if the Fed can get a little more dovish into the end of the year, this market could rip. But we are looking at a similar setup to 2018. You've got this intersection of great fiscal policy and stimulus to help us throughout much of the year. And now we're having the Fed pump the brakes a bit. So we want to be careful with risk management. We're moving up in quality out of small caps, out of kind of the lower quality markets into more higher quality mid caps and large caps. Healthcare has been our favorite sector for the back half. It's a little more defensive, improving earnings estimates into 2027.

37:11We like that as a setup, but you might still see some more volatility ahead. All right. So what do you make of NVIDIA? So, I mean, the company is throwing off a ton of cash. It's got great margins. It's got a relatively strong balance sheet. It's one of the highest quality stocks on the planet Earth. So, you know, it's hard if you like quality, it's hard not to like it. You know, obviously, executive leadership is a meaningful component and strategy for the business. But it's such an enviable position for that business to be in here in the epicenter of the AI. and the AI build out. I mean, you know, we have talked before, Kelly, about software companies or cloud businesses booming.

37:52There is more to tech than just this one company, but it is a high quality company. We would look at it opportunistically here amidst a drawdown. The multiple on it, the valuation on it is actually really attractive relative to the broader market. So like everything else, we would nibble here, take a look at some things, Maybe make even a shopping list, a holiday wish list. My kids have already given me mine. Oh, Lord. And so we want to do that, too, for the market. I guess there's always the risk it doesn't pull back to that price level. You know, what if it's a one-day decline? Or conversely, what if there are weeks and weeks of these, you know, here are the texts.

38:33Here's the, you know, you're going before Congress. You're, you know, you've got your most significant person. Is there anything they can do to somewhat diminish that risk and make it more of a buy now? Or does this really call into question a lot more about its place in the AI build-out? Yeah, I mean, you know, back in the days, taking finance classes and learning from, you know, mentors in this business, you know, CEOs can be incredibly relevant. But, you know, it's also just where's the business? What's the talent around the leadership? You know, how is the business situated? And right now they have a great advantage on the rest of the market.

39:15And it's an enviable position. I'm not saying you can't still see volatility or downside as a result. I mean, but this market also shows you, you know, today I'm watching the rest of the market rally. The rest of the semiconductor businesses are all up. So if you're saying, hey, this dramatically changes that business to no longer be a semiconductor company, no longer, you know, tied into the massive AI build out. I think that's a stretch in this market too. It is such a love, hate type market. One second last week, we thought that the midterms was the greatest thing since sliced bread. The next day we thought it was, you know, the end of AI build out.

39:53We got to be more balanced here and not let a single headline or single event change your overall process or investment, you know, thesis. So it is something to watch Kelly, but I wouldn't let it overwhelm the overall business strength. Yeah, I don't want to jump too far ahead, but it reminds me a little bit of the Steve Jobs era, the transition at Apple. You know, we all thought it would be really tough to have somebody with the magic that he had. And there are a lot of case studies where that hasn't worked. Look at when Howard Schultz left Starbucks. Look at, you know, Chipotle struggling without Brian Nichol.

40:23I mean, it's certainly fair to say in Apple's case, nobody could have done well after Steve Jobs passed. and Tim Cook did fabulously well. So NVIDIA similarly took Jensen to get to this point, but it's not to say there couldn't be somebody else to scale it or navigate these waters now. But we'll talk to our next guest about that, Matt. Thank you for now. Appreciate it. Thanks for having me. Matt Miskin from Manulife John Hancock. Because as Seaport's Jay Goldberg said earlier, Jensen Wong is synonymous with NVIDIA. But if he's forced out, who is poised to take over? Seema Modi has more on that in today's Tech Check.

41:00Seema? We've been taking a bunch of calls today, Kelly. When you ask leaders to describe NVIDIA CEO Jensen Wong's management style, they'll tell you he leads with an iron fist. Very hands-on, 60 direct reports, and yet no second-in-command, unlike Broadcom, Taiwan Semi, and Advanced Micro Devices, where there is a clear number two. Wong's central control and power at NVIDIA makes him harder to replace, too crucial to not just the company, but his strategic and growing role in Washington when it pertains to AI policy, U.S.-China relations, his friendship with President Trump. And yet two separate investors from the buy side telling me in the last hour they now think he won't be able to survive these allegations.

41:42Just to be clear, they are in the minority. The company's board last night saying it fully stands behind Wong and his leadership team. While he is the face of the company, Kelly, executives we're hearing that could play a more active role as the internal and external investigations initiate. Chief Financial Officer Colette Kress and Ian Buck, who founded NVIDIA's software platform, CUDA. Wong is expected to fight to stay on in a post last night. He said, I am committed to protecting NVIDIA and supporting America's national security. Kelly. Yeah, and Colette, the CFO, is very, very well known. Certainly amongst investors who hear from her all the time on the calls are very used to talking with her.

42:23I mean, she'd probably be the choice for most continuity, a seamless choice, a recognized name. She may not have the engineering or the whatever CEO aspects that Jensen had. But of everybody on that list, I mean, she's certainly the one who is most familiar to the investing audience. For sure. Most visible in terms of someone who is well regarded as a chief financial officer, one who comes to mind when you think of earnings presentations, but not really seen as someone who has been groomed as a number two, which I think is a key distinction when thinking about potential succession and the bench behind NVIDIA CEO Jensen Wong.

43:00That's why, you know, if this perhaps leads to some type of period where they look for a new person, the question is what kind of transition period could be in place to groom whoever that may be, whether it's Colette or someone else. All right, Seema, thank you for now. Seema Modi. And let's get to our next guest who knows Jensen Wong personally and says NVIDIA is facing a major corporate governance test with implications far beyond the company itself. Jeff Sonnenfeld of the Yale School of Management joins me now. He's also a CNBC contributor. It's great to see you, Jeff. And where would you say those implications beyond the company are?

43:33What are those? And how are you thinking about this? Kelly, thanks so much for the invitation. And I think where your discussion just went, you were raising, both of you were raising some excellent points. Your appreciation for Colette Kress, I think, is very smart. There are plenty of other people in there. Well, at least there are five or six others that would do a very good job. Deborah Shokos, their chief operating officer of sorts, which is very technical operations. But and Ian Buck, who has been in charge of their hyperscaling. But I think that Colette Kress, you're right, that those of us on the outside have some awareness of her.

44:09And some of you that really work in the media have a lot of exposure with her. And she's proven herself, not that we are necessarily pushing the CEO out the door just yet, but certainly there's a good cause to put him on hold. I've joked with Jensen Hong at events that, you know, how can you be here and everywhere else? There must be 10 of you that he's spread so thin. He's he's and he's always seems to be so unhurried and so interesting. And yet, with all the inquiries going on, these investigations are going to soak up so much of his time, And even if he completely, which is hard to believe, could exonerate himself, it still would be hard to imagine he could do the job.

44:47Colette Crest, though, there are parallels to her, Kelly. Greg Hayes, when he stepped in as a crisis at RTX, the old United Technologies, he had a scandal there. The CEO was pushed out. Greg had been a CFO, never been a CEO of anything, did have made a magnificent job. Irving Shapiro at DuPont had been the deputy general counsel, never been a general manager of anything, did a magnificent job at DuPont. There are examples where people have pulled this off, but it's not the likely pattern. Home Depot had something like this too. You mentioned there's trouble on three levels. Could you quickly run through those, Jeff, what those three levels are in our remaining time here?

45:24Oh yeah, thanks. One of them is the board level. One of them, of course, happens to do with the government agencies and how they've been working across purposes. The third one is Congress. The one that's, I think, most relevant for our audience here today, of course, has to do with these board lessons. You've really mastered the lack of succession depth where they can come up with something there. This board, they're very fine people on it. I know a few people on this board. They're wonderful people, but they're functional specialists. They don't have the enterprise perspective, and they really don't have the reporting relationships to the outside that if you're used to speaking to different constituencies.

45:59These are major gaps, but also inconsistencies that we hear that keep unfolding between what the government asked for and what NVIDIA gave them in terms of this company. It makes no sense that a company of somewhere between$5 and$35 million of assets one year, one year later, was able to buy just about$5 billion of chips. And that's really troubling. And that's with no security clearances, apparently, either in there. So if this was an aerospace company, this would be an inconceivable situation. Yeah. And as you point out, still looking for answers, perhaps, from Jake Clayton, Marco Rubio, to tell us what they know, when they knew it.

46:37And they're at cross purposes. And the big question, of course, is Secretary Ludnick. What was the world of commerce? He fought to have oversight over these chips. The rumors that we hear is that people in the State Department, perhaps Secretary Rubio himself, I don't know this for a fact, but that people are very frustrated in state that the message wasn't getting out there, wasn't getting to the company, and people are laying this at the foot of the Secretary of Commerce, or at least the Commerce Department, that wanted this chip oversight for this kind of circumvention of the trade sanctions.

47:07Good point. Jeff, thanks very much. We appreciate your time. Yale's Jeffrey Sonnenfeld. Coming up, NVIDIA, of course, is a key player in the AI build-out, but the data center lights won't go on without the utility companies behind them. And the utility sector is up 6 % this month. We'll head live to Phoenix to hear from some of the industry's biggest names next after the break.

47:32Rising electricity costs are one of the key drivers of the data center backlash that took center stage in the midterms last week. They build out forcing companies to figure out how to keep costs down while also meeting surging demand. Brian Sullivan is out at the 61st EEI Financial Conference in Phoenix, Arizona. And he's here, Brian, with what you're hearing on the ground today of all days. Well, yeah, there's a lot. Hi, Kelly. There's two topics of conversation. Number one is a Washington Post article over the weekend that said that data centers actually had no impact on electricity costs. We can get that a bit.

48:05Obviously, the NVIDIA news. I think you might have talked about this just a bit in the exchange. There's a salacious aspect to it, but there's people here talking about maybe it helps other companies. I mean, I'm not the semiconductor person, but look at AMD. Stocks up 13 percent. Utilities are up. The entire data center complex is higher today. not NVIDIA, but the talk here amongst just, again, just sort of the talk about Jensen and why and what is that maybe it helps lift all boats. All right. So the big topic coming into this following the election, of course, is what happens with data centers, particularly in places like Texas, where you have a change in the governorship, Ohio, change in the governorship.

48:46Well, nobody that we've talked to, and I've been here yesterday, I had meetings, talked to CEOs, talked to analysts this morning, CEOs, analysts. Exactly zero people that I've spoken with over the last 36 hours or so have suggested they see any slowdown in power demand growth. Now, that doesn't necessarily mean we won't see a slowdown in data center growth, but let's be clear. If data center demand were to go down, power demand were to go down, so you can kind of, Kelly, read between the lines. All right, I've already done a couple of CEO interviews. We got a few more live ones coming up in Power Lunch.

49:21you and I in a few minutes. But earlier today, I spoke with Calvin Butler. He's the CEO of Exelon, massive power company stretching from Virginia to Maryland all the way to Chicago. And I've asked every CEO the same question. Anything that you see that suggests there is a slowdown in power demand. Here's what Calvin Butler said. No, it doesn't. Exelon, because of where we operate, We've typically operated in blue states, some purple, but mostly blue. All of our governors were expected to win, and they did. We had one changeover in Pennsylvania where that state Senate went from Republican to Democrat.

50:01But at the end of the day, it doesn't change how we show up for our customers every day. And we've been advocating for the past several years. We need more supply. We need affordable pricing, and we're part of the solution. So we look forward to working with them. Kelly, we'll ask the same question of Patty Poppy, PG &E, and Bob Frenzel of Excel Energy coming up in Power Lunch in a few minutes. Yes, we'll see you in just a moment, Brian, for now. Thanks. Appreciate it. And that's it for us. Thank you for watching The Exchange. Here are some competitors, by the way, of NVIDIA's. NVIDIA down 5%, Broadcom up 8%, AMD now up 13%.

50:36Power Lunch picks up our coverage after this break.

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