Investors worry the AI trade needs Nvidia's Huang and its largesse

Investors fear an ouster of CEO Jensen Huang might dampen Nvidia's willingness to bankroll the AI boom, in yet another pressure point on the global markets' most crowded trade.

The board of the world's dominant chipmaker, at the ‌cutting edge of computing, was meeting late Wednesday to decide Huang's fate as it grapples with reports of two extramarital affairs involving its longtime leader.

Traders' first ​reaction was to punish ⁠Nvidia shares and those of its customers, including data-centre firms CoreWeave and Naver, while pushing shares of chipmaking rivals Broadcom and AMD ‌higher.

Shares in China's leading makers of graphics ‌processing units (GPUs) surged on Thursday, as mounting turmoil at Nvidia boosted expectations that local chip suppliers could win greater market share. Moore Threads, MetaX and Cambricon all jumped nearly 10%.

But the worry in the market is that the stakes are far higher and that if Nvidia - under a different leader - backs away from a strategy of financing data centres, then ‌the AI boom itself loses momentum.

"He's the face of Nvidia and Nvidia has been front and centre of the AI build-out," said Jun Bei Liu, lead portfolio manager at ⁠Ten Cap, a fund manager in Sydney.

"There's just a lot of uncertainty to come ... not just for Nvidia; it's for the whole AI - all the businesses that they co-invest and sponsor," she said. "I think the fear is that the music might stop."

Nerves, plus the 8% after-hours drop in Nvidia stock, sent Nasdaq 100 futures down nearly 1% in Asia.

Nvidia has been the banner stock of the AI revolution, with its chip technology ahead of rivals and enormous sales driving the share price up some 900% over the four years since the launch of OpenAI's ChatGPT ushered in the AI era.

But Nvidia has also become a torchbearer and financier, anticipating ​demand for ever more powerful chips while sinking billions of dollars into funding its own customers via a mix of equity investments and other ‌promises.

Nvidia's board launched an investigation into Huang following reports that he had an extramarital affair with a businesswoman who was alleged to be a Chinese spy. A subsequent report about another affair came out ahead of Wednesday's board meeting.

"I don't see the next 12 to 18 months of revenue suddenly disappearing if Jensen were to leave," said Shay ⁠Boloor, chief market strategist at Futurum Equities.

"My bigger concern is next decade, because Jensen isn't simply Nvidia's CEO but he's the person who has consistently identified where computing is going before customers even realise," he said.

"Replacing that strategic vision ... is an enormous challenge."

Reuters