Andrew here. Put yourself in the shoes of Nvidia’s board: Would you fire Jensen Huang?
An affair with a customer who U.S. intelligence officials determined was a spy for China, as well as what The Times reported was a relationship with an employee, would typically be grounds for removal. At best, these scandals are a distraction. At worst, they make managing the nearly $4 trillion chipmaker virtually impossible, especially if credible evidence emerges that Huang knew about Nvidia chips improperly going to China.
Yet does his centrality to the company and the A.I. industry mean overlooking those issues? Elon Musk wrote that he would be honored to hire Huang. Palmer Luckey of Anduril declared, “China wants Jensen out, so I want him in.” The venture capitalist Sarah Guo wrote, “We should demand loyalty and accountability, but sainthood cannot be the price of admission to leadership.”
Does the Nvidia board have any middle ground? Could Huang step down to become chief technology officer — or is that just window dressing? We should know the answer soon. More below.
Huge shoes to fill
A month ago, Jensen Huang was firmly ensconced atop Nvidia. Now Silicon Valley — and Wall Street and Washington — are starting to imagine life without him running the giant chipmaker.
If Nvidia’s board removes Huang as C.E.O., it would be a sea change at the central cog of the artificial intelligence boom, with wide-ranging consequences, Sri Muppidi and Michael de la Merced report.
The latest:
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Nvidia’s board has met to discuss Huang’s future, after The Times reported that he had an affair with a direct report, Kimberly Powell, as well as with Alice Huang, an executive who U.S. intelligence officials determined is a spy for China. (The Wall Street Journal suggests that his ouster is on the table.)
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Alice Huang is now living in Beijing, with the knowledge of Chinese security officials, Bloomberg reports, citing unnamed sources.
What Nvidia without Huang as C.E.O. might look like: Remember that the company has no clear succession plan. Analysts have speculated that Colette Kress, its C.F.O. and perhaps its next most prominent executive, could become interim C.E.O. (Nvidia has hired an outside firm to consider possible replacements for Huang, according to Bloomberg, which cited unnamed sources.)
But no one at the company possesses the depth of operational knowledge or the authority of Huang, who has roughly 60 direct reports. Names floated among Nvidia watchers as possible outside candidates include Lisa Su of AMD, Rene Haas of Arm Holdings, Lip-Bu Tan of Intel and Johny Srouji of Apple.
Any disruption at Nvidia could shake up the tech industry. The company’s processors, known as GPUs, underpin a vast majority of A.I. data centers, including most run by SpaceX, OpenAI, Anthropic, Meta, SoftBank, CoreWeave and others.
“SpaceX has committed to using Nvidia GPUs exclusively because they are the best,” Elon Musk wrote on social media in August.
Analysts have asked whether customers would start canceling orders: “A lot of these A.I. purchasing decisions are done by the C.E.O.s at the top, and now the person shaking those hands is no longer there,” Brian Colello, a senior analyst at Morningstar, told DealBook.
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But even some competitors said that Nvidia’s moat — including its CUDA software platform that is used by much of the A.I. world — remains formidable. “Those things don’t disappear because of things in the personal life of the C.E.O.,” Bernardo Kastrup, a founder and C.E.O. of Euclyd, a start-up designer of chips that compete with Nvidia’s, told DealBook on Tuesday.
What about Nvidia’s role as the central banker of the A.I. economy? Nvidia’s stock is down nearly 8 percent in premarket trading, and more than 13 percent over the past five days. Several analysts cut their ratings for Nvidia, or at least their price targets, including at Baird, Morgan Stanley and Citi.
One big question: What would happen to the billions of dollars in financial guarantees and backstops that Nvidia has offered to so-called neoclouds and start-ups to undergird the A.I. boom?
What about the influence vacuum in Washington? Huang, along with Mark Zuckerberg of Meta, has been one of the most prominent voices in President Trump’s ear on A.I. policy. Some A.I. leaders, including Sam Altman of OpenAI, have privately vented that Huang was perhaps too influential in pushing for a lighter touch on regulation.
If Huang is ousted, A.I. executives, including Altman, Musk and Zuckerberg, would almost surely rush to assume his role as chief “Trump whisperer” on the topic.
Nvidia’s problem is that no internal C.E.O. candidate would have the same sway as Huang, a potential issue when it comes to pushing for permission to sell more chips to China. The mood in Washington (and in much of the White House) has shifted to being tougher on China — with apparent holdouts like Commerce Secretary Howard Lutnick facing more heat.
HERE’S WHAT’S HAPPENING
Mississippi elects a Democrat, Scott Colom, to the U.S. Senate. Colom will be the first Black person to represent Mississippi in the chamber since the Reconstruction era. (His backers include George and Alex Soros, the Democratic donors.) Colom defeated the state’s incumbent, Cindy Hyde-Smith, a Republican, in a major political upset that is expected to give Democrats a sizable legislative advantage in Washington starting next year.
United Airlines is banning third-party artificial intelligence agents from booking flights. The airline said the tools could expose sensitive customer information or make unintended purchases if agents are able to gain access to its ticketing systems. Companies are grappling with whether to permit outside agents to peruse and buy amid concerns that the technology might upend their relationship with customers and pricing power. United’s biggest domestic rivals, Delta Air Lines and American Airlines, have adopted more permissive policies about allowing agents for booking.
A closely watched sexual harassment case against SpaceX advances. A federal appeals court denied an attempt by Elon Musk’s company to shift a lawsuit, which was brought by eight former employees, to private arbitration. (The employees were fired after they wrote a letter urging the company to distance itself from comments Musk made, including one poking fun at sexual harassment accusations against him.) Elsewhere, a growing number of young people are suing SpaceX’s A.I. division, arguing that its Grok model was used to create sexualized images of them as children.
A silver lining for neoclouds?
Artificial intelligence bulls have received a lift this week from a battered corner of the market: the so-called neoclouds. Market watchers are already wondering how long it will last.
Shares of two of the biggest ones — CoreWeave and Nebius — rallied impressively on Wednesday. Both companies are major Nvidia customers, and they lease computing power to A.I. labs.
Shares in both companies are down sharply in premarket trading. Nebius this morning reported a big jump in revenue last quarter.
The bull case: CoreWeave delivered blowout third-quarter earnings on Tuesday, and raised its full-year revenue projection on the back of heavy demand. Michael Intrator, the company’s C.E.O., said computing demand was “oversubscribed” for the next two years
The bear case: CoreWeave needs huge amounts of capital. Until now it has relied mostly on riskier “junk” bonds, which often carry high interest rates, to finance its buildout. But the cost of borrowing has been rising, prompting investors to worry about its ability to pay back the debt and still grow.
Now CoreWeave is reportedly preparing to tap the credit market again. It plans to raise at least $4 billion through investment-grade bonds, Bloomberg reports:
Morgan Stanley and Mitsubishi UFJ Financial Group Inc. are leading the potential financing, which would be syndicated to investors in phases, according to people with knowledge of the matter. The deal may come to market as soon as next week, but the plans haven’t been finalized and could change, the people said, asking not to be identified because they’re not authorized to speak publicly.
The junk-rated company has been heavily reliant on the high-yield debt markets to finance its buildout, but has been able to lock in cheaper borrowing costs by using chips and related contracts to back its debt — a structure that is expected to be used for the new financing.
The bonds could be sold at a yield of 7 percent to 7.5 percent, according to Bloomberg, which is roughly half the yield of where its junk bonds are trading.
Quote of the day
“I’ve been a Democrat my whole life. I grew up in a far left environment. I know more about being a progressive than almost anybody on the planet, and I absolutely believe Palantir — all of our products are essentially progressive.”
Alex Karp, the C.E.O. of Palantir, a major government contractor, describing his political leanings to Politico after Democrats seized control of Congress in the midterm elections. Karp, who called the Democratic Party “totally irresponsible” last year and has donated to the MAGA Inc. super PAC, also told Politico that Republicans’ losses in this election cycle were a “referendum” on “economic justice.”
The legacy of Richard Posner
Tributes are pouring in for Judge Richard Posner, a giant of American jurisprudence and a prolific writer on economics and policy, who died on Tuesday. He was 87.
For nearly 40 years, Posner served on the U.S. Court of Appeals for the Seventh Circuit, in Chicago. As Adam Liptak of The Times notes, his work included:
thousands of judicial opinions and more than 50 books on a vast array of topics, along with countless scholarly articles, essays, book reviews and blog posts.
He was, the journalist Gary Rosen wrote in The Wall Street Journal in 2002, “a one-man think tank.”
Posner was one of the most influential jurists of his generation. He was an author of legal opinions in numerous major business, antitrust and intellectual property cases.
As an author, Posner weighed on both meaty and quotidian topics, including counterterrorism, sex and the economics of college tuition.
An ardent defender of free markets, he stunned many with his 2009 book, “A Failure of Capitalism: The Crisis of ’08 and the Descent into Depression.” In it, he laid the blame for the global financial crisis of that era more squarely on the capitalist system itself than on Washington or Wall Street.
What people have said about Posner:
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“He taught me to think without fear,” Tim Wu, a professor at Columbia Law School who clerked for Posner and later advised Joe Biden on competition and antitrust policies, wrote on social media.
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“He was one of the rare people who ever change their minds,” Richard Thaler, the economist and Nobel laureate, wrote on social media. “At first he knew behavioral economics was wrong, but he softened over time.”
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“One of the most brilliant, hard-working and intellectually honest people I have ever met,” wrote Luis Garicano, a Spanish economist and professor at the London School of Economics, who worked with Posner to analyze U.S. intelligence failures after the Sept. 11, 2001, attacks. “He wrote his own opinions rather than leaving them to his clerks.”
THE SPEED READ
Deals
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iHeartMedia is said to be considering a sale of all or some of its podcast business in an effort to raise cash and prop up its flagging share price. (Bloomberg)
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Agile Robots, a robotics start-up, has raised $500 million in funding from investors including SoftBank and Nvidia that values it at $8.5 billion. (NYT)
Politics, policy and regulation
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Gavin de Becker, a campaign donor and security consultant, reportedly funded part of one of Health Secretary Robert F. Kennedy Jr.’s summer vacations, including a yacht trip in Greece. (WSJ)
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Voters rejected data centers in the midterm elections. Many will be built anyway. (NYT)
Best of the rest
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