NVIDIA CEO under siege: How fund managers are reacting

NVIDIA (NASDAQ: NVDA) shares tumbled more than 8% in US after-hours trading as investors weighed the prospect of the AI chipmaker losing its founder and CEO.

The Wall Street Journal reported that the board was preparing to oust Jensen Huang, while Bloomberg reported that directors were working with an outside firm to identify potential replacements.

Huang, who co-founded NVIDIA in 1993 with Curtis Priem and Chris Malachowsky, acknowledged over the weekend that he had been unfaithful to his wife.

NVIDIA announced an independent investigation into reports that he had been the target of a foreign intelligence effort. The reporting centres on his relationship with Alice Huang, an unrelated former executive of NVIDIA customer Megaspeed whom US officials reportedly suspect of working for Chinese intelligence. NVIDIA said at the time it had no reason to believe company secrets or US national security had been compromised.

And just today, The New York Times reported that Huang also had an affair with Kimberly Powell, vice president of health care at NVIDIA.

Wall Street was already turning more cautious. 

Baird downgraded NVIDIA to neutral, citing uncertainty over 2027 data centre spending and Huang’s future at the company. Morgan Stanley removed NVIDIA from its Top Pick list while retaining its overweight rating, according to Canada's The Globe and Mail.

Who could take over?

Thomas Rice, co-founder and portfolio manager at Minotaur Capital, told Livewire the fund holds NVIDIA but is underweight. He expects the shares could take another hit if Huang’s departure is confirmed, although he thinks much of the immediate impact is already priced in.

"For the broader AI trade, this is a governance shock at one company, not a demand shock," he told Livewire.

“The bigger swing factors are who replaces him and what the outlook looks like at results on 17 November (18 November in Sydney)."

Rice sees chief financial officer Colette Kress as the natural interim choice. For a permanent appointment, he points to Ian Buck, who helped create NVIDIA’s CUDA software platform and runs its data centre business. Buck has yet to be tested as a CEO, and Rice expects the board to consider external candidates as well.

“The first thing I'd want to see is the product roadmap reaffirmed, including the Vera Rubin ramp. After that, I'd want the senior engineering team kept together. I'd also want clarity around compliance questions regarding Megaspeed.”

The earnings risk runs through Washington

Rice sees the biggest increase in risk in Washington, where NVIDIA has opposed proposals for chip tracking and tighter export oversight. He says the company’s outlook already assumes no data centre revenue from China, with Hopper shipments to the country accounting for less than 1% of data centre revenue last quarter.

“The bigger risks are slower licences for the Middle East and other sovereign deals, and compliance costs from chip tracking. On top of that, NVIDIA would have less pull in Washington at exactly the wrong time," he said.

Mohamed El-Erian, Chief Economic Adviser for Allianz and a former PIMCO chief executive, said on LinkedIn investors had largely shrugged off the initial reports on the assumption  Huang would stay. He said the latest developments challenge that assumption and could have repercussions beyond NVIDIA.

"This is no ordinary CEO. This is no ordinary company. This is no ordinary sector. This is no ordinary time," El-Erian wrote.

“With so much levered to all this, and with so much uncertainty in play, it's hard to see the effects contained to just the company."

Rice is watching specialist cloud providers such as CoreWeave (NASDAQ: CRWV) and Nebius (NASDAQ: NBIS), which Huang has backed through investments, capacity commitments and guarantees. A successor could take a more conservative approach to NVIDIA’s balance sheet. CoreWeave fell about 5% after hours after rallying in the regular session.

"Jensen has backed CoreWeave, Nebius and their peers with investments, capacity commitments and guarantees. A new CEO, with a board under scrutiny, could be more conservative with NVIDIA's balance sheet, though NVIDIA does have a strategic incentive to support a broader customer base," Rice said.

Australian investors also have exposure to NVIDIA through ETFs such as VTEK, NDQ, IVV and FANG. Most were still in the green at the time of writing, with other holdings helping cushion the impact of NVIDIA’s after-hours slide.

The next ASX session will be a better test of how much of the sell-off flows through to each fund, depending on its NVIDIA weighting and how the rest of its holdings trade.

Could Google and Amazon gain ground?

Google’s TPUs and Amazon’s Trainium already give some of NVIDIA’s biggest customers alternatives. Rice says uncertainty at the top could strengthen those buyers’ hand as they negotiate chip capacity for 2027 and 2028. With advanced packaging capacity tight across the industry, he expects any near-term pressure to show up first in NVIDIA’s margins.

“The longer-term risk would be if a CEO change reduces NVIDIA's ability to execute at the frontier, as happened to Intel.”

Would Minotaur buy the dip?

Rice says the business is in good shape and the stock already looked cheap before the sell-off. Minotaur had been looking for a chance to increase its position.

"I think this is an opportunity rather than a time to bail. The business is in good shape, and the stock was looking cheap before this fall," he said.

"We're currently underweight and have been looking for the right point to add. A forced leadership change at a sensible price could be it. We'd just like a little more clarity on who's running the company before we lean in hard."