MRNS

By David Weidner

Nvidia can't afford to lose its CEO, but it's time for the company to grow up and get serious about governance

Nvidia investors need to see proof that the company has a deep bench of leaders beyond CEO Jensen Huang.

It's a tale as old as time. A powerful leader gets high on their own supply. The rules don't apply to them. Bill Clinton. Kristi Noem. Steve Easterbrook. Andy Byron (the best Coldplay show, period). The list goes on.

Now, we have Jensen Huang and the spy who got close to him (allegedly). The story would be ho-hum if not for the fact that he co-founded and runs the biggest engine of the economy, Nvidia (NVDA). The company supplies the hardware behind artificial intelligence and, well, isn't that the whole ballgame? That's a problem, and investors know it. The stock is down 16% in just the last week, 24% in the last month.

To understand how important Huang is, you should read Steven Witt's "The Thinking Machine." It's Huang's biography. The takeaway: AI probably doesn't happen, at least as fast or effectively as it's been happening, without this guy - which is to say, if Huang is forced out, that's a problem, like removing Thomas Edison from the electricity project.

See also: Meet the former prosecutor Nvidia hired to investigate the Jensen Huang spy scandal

But you know all that, and you're probably here to see if you should buy Nvidia's stock on a dip that looks more like a value-removal machine (that's a shout out to fans of The Cult). If you've ever read me before, you know I don't give investing advice - I just try to be clear-eyed about what's going on. You can take it from there.

So, what's going on?

This is a trainwreck that is going to mess up your portfolio whether you own, buy or sell Nvidia. I rarely ever get to crow about calling something correctly, but I warned about Nvidia being too big in August. I was right. Every major index is down, and Nvidia is the anchor. Victory lap finished. So, let's move on.

Even before Huang got accused of fraternizing with the enemy, Nvidia was overvalued. It's still a $4 trillion company even with the fire sale, but its financing arrangements are propping up a lot of the AI platforms. It's basically lending to its customers.

It's also still too damned big even with the recent haircut, comprising roughly 6.5% of the S&P 500 SPX and 13% of the Nasdaq-100 NDX.

Don't miss: Nvidia could soon face tougher export rules, making it harder to sell chips to China

But loose lips with China carry another risk I pointed out in August. I noted that the Cloud Security Alliance published research that showed Nvidia's market dominance to be a major component of an overall AI-industry systemic security threat. Its advice was to find the weak points and fix them before something breaks and does it for you.

Uh-oh. Cue the investigations.

For investors, the biggest problem is that there is no obvious successor to Huang. Unlike Apple (AAPL), which telegraphed succession and gave the market time to absorb the shift from Steve Jobs to Tim Cook to John Ternus, Nvidia hasn't showcased its leadership team. Surely, there's great talent there, but Huang has been front and center. There is no succession plan other than the one they presumably started a week ago.

That means Nvidia is Huang and Huang is Nvidia. Given the central role the company is playing in our economy and the revenue-sharing agreement with the U.S. government tied to export licenses, like it or not, we're all kind of on the hook over whether Huang survives the scandal or doesn't.

It's also why the best course here is to keep Huang in the job, with some oversight. He's too important to prosperity and national security. AI is driving the U.S. economy, and Huang is the AI guy. It shouldn't have come to this, but here we are.

So, what does "some oversight" look like? Start with the board doing the job it should have been doing all along. Nvidia needs an independent chair, a public succession plan and a bench of executives investors can name. Not next year. Now. If Huang stays, the price is sharing the stage.

Washington has a role too, and it isn't a perp walk. If the government is going to be Nvidia's revenue partner on chip exports, it's entitled to know who Huang talks to and what gets shared. It should treat this like the national-security matter it is: quietly and seriously, without turning it into a spectacle that sinks everyone's 401(k).

Huang needs to stop being the whole show. The leather-jacket keynotes made Nvidia a legend, and they also made it fragile. A company this central to the economy can't hinge on one man's judgment, personal or professional.

None of this makes Nvidia cheap, and none of it fixes the concentration problem. Even if Huang survives, your index fund is still a bet on one company and the man running it. That was true before the scandal, and it will be true after.

So, keep Huang. Fence him in. Build the bench. And, if you own the market, which most of you do, understand that you own this mess too.

The genius stays, and the guardrails go up. That's the deal.

-David Weidner

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11-11-26 0730ET