It could not remain a private matter, that of Jensen Huang, who has been linked to Nvidia for 33 years. The group today must demonstrate not so much that it can continue to exist despite the scandal, but that it can quickly recover from the fall of its co-founder. After the board of directors launched an independent investigation into Alice Huang’s extramarital affair on November 8, what everyone was fearing is unfolding.
The woman, a former manager of Megaspeed (a Singaporean company) suspected by the American authorities of working for China, allegedly purchased Nvidia chips worth over 4.8 billion dollars and smuggled them to Beijing. There are no formal charges, but it seems that some very advanced chips managed to arrive in China despite the bans. This news, together with the resignation of Jensen Huang, weighed on the company.
The scandal impacts the markets
Nvidia was the first listed company in the world to exceed $5 trillion in market value. The system applied by the company in recent years, a circular system that produced billions of dollars and reinvested them in the sector, has effectively supported the American economy.
Now the scandal is shaking the company’s image; we could instead say that the accounts are rather safe. However, the losses are enormous: in one week the group lost around 600 billion dollars, 12.75%, bringing its market value below 4,000 billion.
The two rivals, AMD and Broadcom, gained 20%. On Friday, however, they closed in the red, because what is happening to Nvidia now is only one element added to what is described as a possible artificial intelligence bubble and which is shaking the entire sector.
Third quarter accounts
Wall Street and Nasdaq held up, closing at +2.5% and +2.3% respectively. This is the best week since the beginning of August. Even Nvidia’s third fiscal quarter, which will be presented on Tuesday for the first time without Huang at the helm, is not expected to show the shocks of the last period.
In fact, the quarter ended on October 25, before the scandal, and from the results, according to industry estimates reported by The Messenger, revenues are expected to rise by 91% compared to the previous year.
The future of Nvidia and the United States
Colette Kress, interim CEO, has a problem that is not economic, but image-related: how much trust can Nvidia still demonstrate? Huang had put pressure on Donald Trump to open a sales channel with China, underlining the economic aspect, the value of around 50 billion dollars that it would bring in wealth to the United States.
The connection between Huang and the president also opens up the political question. Since January, a new Democratic majority in Congress has been preparing to question people around the former CEO about the sale of chips to China through Megaspeed.
