Nvidia's Future Rests Squarely on Shoulders of CEO Huang

Let's discuss how the investigation of NVIDIA CEO Jensen Huang's affair with an alleged Chinese spy is raising questions about the company's future. Bloomberg's Ryan Vostelica has been reporting on this and joins us now from Chicago. Ryan, how are views around key man risk at NVIDIA with this current scandal evolving? Well, there is still a great deal of uncertainty. It is really difficult to overstate how important he is to NVIDIA, but also the AI trade and really the economy overall. So there is a lot of risk and uncertainty. There are a lot of concerns about what is ultimately going to happen here. If he has to leave the company, what kind of downside risk does that represent? There seems to be a lot of concern about that. One person I spoke to said that if he goes, the bull case goes with him. So that's what people are looking at right now. There's still a lot of investigations, a lot of questions out there, and we don't know how these are going to be resolved. And until we do, I think people are just going to be very cautious about bidding the stock up in the way they would have maybe in the past. Brian, BofA downgraded the stock on obvious reasons, that it's really about potential government action when it comes to the congressional hearing. Are you expecting more brokerage firms to also downgrade the stock? Well, we've already seen shares come down quite a bit, I think 30% or so based on where it closed yesterday. And the valuation has really gotten to levels that haven't been seen in more than a decade. So if people are still optimistic about AI and about growth in AI spending, you can probably make a pretty good valuation case for the stock. But do you still have this overhang? And I think that's the real tricky part right now. There are certainly a lot of other chip makers that are involved in AI. A lot of them also have very strong growth prospects of their own. Again, And one person I spoke to said, you know, he continues to like the AI trade, but he's watching NVIDIA. Other people might be picking other companies in the space if they want exposure to AI, but don't want to take on the risk that is related to the uncertainty surrounding Jensen and all the stuff that's been coming out. Ryan, there was a Republican senator, Senator Kevin Cramer, on the Senate Banking Committee speaking to Politico, said the potential for extortion is so tremendous that something as sensitive as NVIDIA chips, I think he's got to go. For investors, just how big of a risk is not even just earnings next week, Ryan, but is a government investigation? Well, I think that's the real question here. We also have NVIDIA doing its own probe. So the idea of government regulation, maybe subpoenas, like all of this stuff is just, it's so fundamental and so big that it really is difficult to overstate just how big the questions are right now. When you have questions that are that big, it suggests how wide the range of outcomes could potentially be here. So it's just very curious, you know, we don't. Have really any idea of what could come out of these investigations. Perhaps this is just, you know, some kind of personal indiscretion and people are able to move on from there. But if there are bigger questions about the company or about his conduct, that really raises a bunch of major possibilities that people will then have to price into the stock. And we don't really know how they do that yet until we get more information. When you talk to investors, are they? Is indicating anything that Jensen Huang's job may be at risk? And how are they pricing for a future without Jensen Huang? Well, I have had people say that, you know, there are other, you know, there's precedent for people leaving following some kind of personal indiscretion like this. So there would be precedent for that. The fact that you have this sort of espionage element certainly make things, you know, it feels like the stakes are a lot higher right now and the questions are a lot bigger than just personal conduct. Where you go from that, you know, Again, it's very hard to say right now, but like I said, somebody told me that if he goes, the bull case goes with him. It is really difficult to overstate how important he is to the company and AI overall. He's an important hype man. He's an important person who has been out there trying to ease concerns about how fast AI is growing. He is so central to this, and AI is so central It's central to the economy that if you remove him from it, The implications and ramifications are potentially vast and people don't yet know how to price it into stocks for NVIDIA or really the market overall. You know, Ryan, we were talking with Anne Berry just moments ago and she was saying to have these founder-led companies where you have so many direct reports that it's a flat structure plus one person at the top can be challenging. And I wonder in this period for how big of a problem that is. For tech companies in general, again, just putting aside, if you can put aside the allegations around a Chinese spy, but if this is also just an issue of governance that investors are taking a closer look at. Yeah, there is a real question about what is the succession plan, even absent this controversy. And again, one person I spoke to was like, he said he went around polling a bunch of people he works with and said, you know, can you name a second executive at NVIDIA besides the CEO? And none of his colleagues could, which just shows you how important he is. Like the whole key man risk here does seem pretty substantial. And I'm not saying that there is no bench at the company, but certainly he is so high profile that the idea of Not having him at the helm anymore is something people would consider, you know, potentially huge, you know, like orbiting around a different sun. Ryan, thank you for keeping us on top of everything NVIDIA Bloomberg's Randall Stelica.