What's Next For Nvidia Without Jensen Huang? Can the AI Empire Survive?

A bombshell scandal has rocked the world's biggest AI chipmaker. NVIDIA co-founder Jensen Huang has resigned as CEO after reports of extramarital affairs, including one with a woman suspected by U.S. authorities of spying for China. CFO Colette Kress is now taking over as interim CEO as NVIDIA faces growing questions about its leadership. And the future of the AI boom. And with the company set to report earnings next week, investors are bracing for what comes next. Joining us now to break it all down is Ray Wing, CEO of Constellation Research. Thank you so much for being here, Ray. Hey, thanks a lot for having me, Sue. Of course. Now, Ray, I mean, everyone is talking about this story. It's having such a massive impact across so many sectors. Jensen Huang has built NVIDIA into an AI powerhouse. How big of a shock is his departure for the company and really the entire tech industry? Look, it's a big shock. It's a victory for corporate governance because that's important, especially for the number one company in the world at that time. But it's a big loss for investors and for AI. I mean, if you see what's happened, a trillion dollars wiped out. I mean, that's the issue. Ultimately, it's a national security issue and a double affair, triple affair now, and a trillion dollar drop in the market probably was too much of a breach of trust for the board. And I think that's really kind of the issue. When we break it down, we're trying to figure out, like, why? And I think it has something to do with the chips being sent to China as part of the issue and how it was getting through Singapore, how it was getting through Dubai. And I hope more gets revealed as to what was going on there. Yeah, and I'm sure it will with all of these investigations coming out. I mean, NVIDIA's board was investigating reports of an alleged Chinese espionage operation here. How much damage do you think that that scandal has already done? And do you think that the allegations of another affair between Huang and a female employee of NVIDIA who reported directly to him and any others that might be coming out are actually more damaging even? You know, at this point, it's reputational risk. I don't think it's going to affect the company's performance. I mean, they've sold out for the next, I mean, year in terms of chips. That's not the issue. I think the issue is really is China getting the technology from NVIDIA indirectly and really what's that involvement. And I think that's where people are going to focus their time on. But there's also things we do have to worry about, which is we need to be more vigilant. for honeypot schemes in pharma, military tech, quantum space, and more because China's been running this operation inside the U.S. for quite some time. Yeah, I mean, that's a really good point that there are so many other sectors here that could have similar things going on with other people high up at these other companies in other parts of our economy and our world here. I mean, thinking about Huang being the face of NVIDIA for more than three decades, do you think that the company can really maintain its dominance without him? In the next five years, yes. This is kind of what happens when Steve Jobs was ousted or passed away. I mean, you can see the difference, what was happening. I mean, look, at the end of the day, most of the board were friends of Jensen since 1993 or in the 90s. And this key man risk means it's very hard to replace Jensen, but the product roadmap is set for the next five years. You know... And you're right. Jensen is synonymous with AI. He's the visionary. The issue is liability from the intelligence breeds. And so if you're trying to find the right internal candidates, they've got to master the product roadmap. They've got to master the relationships. A lot of these startups were funded and a lot of these industries were created because Jensen was the backer behind this by providing the chips. He was planning two, three, four layers out from the future. I mean, if you were just any other semiconductor company at the time, you were You're only thinking chips. He's thinking like, we're going to take this to. All the way to the Omniverse. I mean, that's how far he was going from physical AI and robotics to the next set of companies to photonics to how these AI data centers were being created. He was the one building these partnerships with his team. And when you're a team and where you have 60 direct reports, I mean, that is a feat very hard to pull off. It is. And that vision just stretching out so far into the future there as you're talking with everything that he was setting out to do. And now we have CFO Colette Kress as interim CEO. Do you think that she was the right person to kind of steady the ship here? Absolutely. Collette is the right person to set up this play, I'd say, transitional CEO, unless she really wants that job. I mean, internally, there are a few people that would be useful in terms of like, you know, for the stock market and for the internal teams, like Ian Buck, the founder of CUDA, one of them that people are looking at. But there are external candidates, Rene Haas at Arm, Thomas Kurian at Google with us, what they've been doing with TPUs and then taking it to the app layer, given his experience. And it would be even crazier if NVIDIA picked up AMD from Dr. Lisa Su at the same time and have her run it, right? Those are some of the most wild ideas that are out there, but those are names that are being floated around here in Silicon Valley barbecues and parties at the moment. Yeah, I was saying, I mean, we definitely have to wait and see what happens next. But those are all potential candidates, potential people who could come in and now run this company. Talking about the stock market now, NVIDIA's stock has taken a major hit this week. Are investors overreacting, do you think? Or is there a real reason for concern? I mean, you talked about the fact that they already have sales stretching out for so far. But is there a real concern here when it comes to their stock price? Risk off people are worried about. Congressional hearings, the reputational risk, the time the board's going to be and management team's going to have to worry about dealing with all those attacks. Risk on folks are like, look, we're 40% down for the year. It's time to buy. It's never going to be cheaper. I'm on the risk on count. I mean, if you go back and look at this three months from now, six months now, even like five years from now, you'll be like, I should have bought during this. I didn't know what was What was going to happen with this crisis? I think that's. I mean, just even by the numbers, and if you look at the PE ratio, they're at 20, 21%. You know, NASDAQ is at 27 to 29, 29X, right? So that's kind of like, you know, this is a really good time to buy if you really believe in the overall NVIDIA thesis. Yeah, it really does seem that way. And we also have coming out very soon NVIDIA's earnings, right, next week. How much more important do you think that this report has become, given everything that has now happened? How many more eyes are going to be on this now? You know, it's not about the eyes, but the earnings gives NVIDIA an opportunity to tell their side of the story. And hopefully by that point, they can talk about the search that is going on for a new CEO, all the governance provisions they put into the board to avoid key man risk, to figure out what other additional issues they have to worry about, their response to the subpoena. They're in crisis comms mode. They've got to move in that direction to reassure investors. I don't think the earnings is going to be an issue if they don't make their numbers. actually reported and beat. And so if they're not able to do that, the basics, then yes, we're going to be in for a wild ride. But based on how the hyperscaler commitments and based on what's been publicly talked about out there, it looks like they should be able to make their numbers. Now it's a question of, do we have the confidence of the board, the confidence of the management team? Right, right. We'll definitely have to wait and see what happens with that next week. Huang also has close ties to Washington, right, and has pushed for access to China's chip market. So how do you think his exit could change NVIDIA's relationship with the U.S. government and really what happens now with this policy moving forward? It's going to be very hard to replace Jensen in that model. I mean, this is one of those areas where that relationship, that human touch, his vision and passion for the AI industry, that's going to be the place where they're going to have to find someone that's equally passionate and equally respected to be able to pull that off. Yeah, they definitely will. We'll see if that can happen and how that could possibly happen. Looking now at some other companies, right, AMD, Google, developing their own AI chips. Do you think that NVIDIA's leadership crisis could give competitors an opening? And you talked about some of the potential scenarios here where maybe someone from one of those companies actually goes to NVIDIA. But just thinking about this kind of competition here for any of the other chip makers in the market, what do you think it's going to do for them? Look, with the demand still strong and with the need to drive down the cost of compute and the use of power, I mean, you're going to see the TPU issue become bigger, but it's not in the 2027 cycle for sales. It's going to be in the 2029 cycle where you're going to start to see that inflection point where TPUs take over in terms of being looked at. You're seeing right now with AMD's Instinct and Epic offering for AI data centers, that's where you're actually seeing some of the... You know, demand going over there because supply is not available, but it's not anything yet that has impacted NVIDIA's capability to get there. But these are things that are going to happen 36 months out where decisions that were made today are going to impact three years out. Yeah, I mean, looking ahead, as you're talking about, we have quite a while to see what these impacts are actually going to be in the longer term. But do you think that this is really kind of a setback for NVIDIA, but they will keep going and we'll just have to wait and see what happens there? Or do you think that Huang's departure actually marks a true turning point for the entire AI boom? It's the latter. It's Jensen's departure is a significant blow to American AI Competitiveness to China. And I think that's the issue I'm most worried about. For the industry, the industry will be fine. I mean, they'll come up with new chips. They'll come up with new designs. It's really the passion and the vision that Jensen had that is, well, that's what's going to be missed. Well, we definitely have a lot to look at here as we move forward. But Ray Wang, CEO of Constellation Research, we really appreciate your time today breaking this all down for us. Hey, thanks a lot.