The filing arrived Wednesday afternoon, a few hours before the release that explained it. Nvidia’s board had accepted Jensen Huang’s resignation as president, chief executive and a director, effective immediately. The confirmation came Thursday morning, with a statement thanking him for 33 years and naming the people who would sit in his chair.
Colette Kress, chief financial officer since September 2013, will serve as interim CEO and keep the finance job. Harvey C. Jones, a director and former chief executive of Synopsys, becomes the board’s first-ever chair. The board said it will weigh internal and external candidates for the permanent role. It named no front-runner and set no timetable.
The stock fell as much as 14% Thursday, and roughly $600 billion of market value went with it. The company still reports third-quarter results on Nov. 17, a date fixed before any of this happened.
The sequence that produced the resignation is short. Reporting on Nov. 6 tied Huang to a business executive whose former employer, Megaspeed, sits in chip distribution in Singapore. On Nov. 8 he acknowledged an extramarital affair and apologized. Independent directors then retained Joon H. Kim, a Wachtell, Lipton, Rosen & Katz partner and former federal prosecutor, to run an investigation. By Nov. 11, further reporting described a relationship with a subordinate, Kimberly Powell, Nvidia’s vice president of healthcare.
Washington moved at the same speed. Rep. John Moolenaar, who chairs the House select committee on China, said Huang had agreed to brief lawmakers. The Information reported that the executive at the center of the affair facilitated at least $7.5 billion of Nvidia chip shipments to Chinese firms, a figure the company has not addressed. Singapore’s home affairs ministry barred her from re-entering the country, saying she gave police information she knew to be inaccurate.
A board that wanted a fight could have had one. Nvidia has eleven directors, and all of them except Huang are classified as independent. The bylaws let a majority remove a chief executive with or without cause. The alternative to a resignation was months of depositions, a founder answering questions about his private life under oath, and a shareholder vote that would have worked as a referendum on the investigation itself.
Kress is the least dramatic choice available, which is presumably the point. She spent nearly 25 years in finance at Cisco and Microsoft before joining Nvidia, and she has spent thirteen years explaining a business that doubled, then doubled again, to people who did not entirely believe it. What she inherits is the part of the job that is not explanation: shipping product on schedule, allocating scarce supply, and choosing among customers who all believe they should be first.
What the board did not do is pick a successor. Nvidia’s advantage has been a cadence, a new platform every couple of years with software that works on the day it ships, and the relationships that made that cadence possible were Huang’s. He spent three decades with the foundry partners and the largest cloud buyers, in rooms where the allocation of a scarce part is decided by who is trusted. Kress has been in those rooms for the numbers. She has not been the person who says no.
Founder departures at technology companies usually arrive with an heir attached. Microsoft had a bench when Bill Gates left. Apple’s first attempt at succession went badly enough that the company had to try again. Nvidia now has a chief financial officer and a chairman, which is a structure rather than a plan.
The governance, at least, is better than it was a week ago. An independent chair with a mandate, an investigation reporting to directors rather than to management, and a search controlled by people who have just demonstrated they will act: these are the features of a company that intends to outlast one man.
The problem is timing. Findings from the investigation will land in the middle of the search. An outside candidate will want to know what the directors knew and when they knew it. An internal candidate will be asked whether loyalty counts as a qualification, and the answer will be read by every employee who stayed.
Analysts have split along that line. Some argue the operating business is a machine that runs on purchase orders and software releases, and that a change at the top does not move either. Others say the shares carry a governance discount until a permanent chief executive arrives with a public mandate, and that the discount will not close on an interim appointment no matter how competent the interim.
Both can be true. The order book is real, the customers are committed, and the roadmap is funded. None of that answers the question the board has left open, which is whether Nvidia is now an institution with a chief executive, or still a founder’s company that happens to be public.
The next signal comes Nov. 17, when Kress runs her first earnings call. What she says about supply, and how she handles the first analyst who asks about the investigation, will tell the market more about the succession than any search update the board issues between now and then.
