Jensen Huang is bigger than Nvidia — and that is a problem
By Shuli Ren / Bloomberg Opinion
When a high-profile chief executive is in trouble, investors worry about key-person risk and whether the company will continue to prosper. What if that businessman is crucial to an entire narrative that has underpinned the global markets boom?
Nvidia Corp on Sunday said that it was opening an investigation into Jensen Huang (黃仁勳), after the CEO acknowledged that he had a romantic relationship with a business executive whom US intelligence determined was a Chinese spy.
The path forward — and Huang’s future — will depend on what emerges from the board’s fact-finding process. However, the revelation itself is shaking up the entire artificial intelligence (AI) world. Nvidia is not only the sector’s most valuable publicly listed company, with a market cap of US$4.5 trillion, but has lent its own creditworthiness to speed up infrastructure growth.
Over the past three years, it has offered US$300 billion in financial support to customers, in addition to investing billions into start-ups, including neoclouds — data center operators that lease out computing power to AI labs.
Despite having only a 3.4 percent stake, Huang is very much the boss and the architect of Nvidia’s corporate strategies. He has no heir apparent and has created an informal organization structure whereby his direct reports — as many as 60, according to Bernstein Research — are tasked with rapidly implementing his decisions.
Would Nvidia’s money keep on flowing now that the central banker of AI is in a bit of trouble himself?
This is bad timing for neoclouds. As the likes of CoreWeave Inc are hit with skyrocketing borrowing costs and financing channels close, they naturally look to Nvidia for a lifeline. For example, Australia’s Firmus Grid Ltd is reportedly in talks with the company for follow-on venture investments after pulling a much-anticipated initial public offering in Sydney. Deal negotiations might well be put on hold or scrapped altogether.
With Huang’s authority challenged, it is only natural that Nvidia’s dealmakers take a more defensive stance and step back from vendor financing to customers, which has already worsened the chipmaker’s credit profile. The cost of protecting Nvidia’s debt against default has tripled this year, as investors look to hedge against potential losses from mounting debt tied to data centers. Its corporate bond spread has widened as well.
How about AI infrastructure developments across Asia? The worry is that Nvidia would have to slow down shipments to the region while the company is under public scrutiny. The Chinese woman whom Huang had an affair with was an executive at Singapore-based Megaspeed International, which has been building data centers in Southeast Asia. The operator reportedly rented compute to Alibaba Group Holding Ltd and gave China a backdoor way of getting access to advanced Nvidia chips.
As such, national security risks would surface just as Asian banks are getting more comfortable with chip financing and capital deployments into data centers are gaining momentum. The pace of billion-dollar deals could slow as lenders not only question how fast graphics processing units would become technologically obsolete, but also whom their ultimate customers are.
A charismatic salesman, Huang has done a lot of talking, predicting the next trillion-dollar company and promoting Asia’s ecosystem. However, with his star power tarnished, the AI trade is looking increasingly shaky. A bear market is looming.
Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. A former investment banker, she was a markets reporter for Barron’s. She is a CFA charterholder. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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