Investors worry the AI trade might lose Nvidia’s largesse after Huang

Detailed summary

As chip giant Nvidia’s chief Jensen Huang stepped down on Thursday, investors’ biggest fears were as much about the future of the multitrillion-dollar company as its ability and willingness to continue bankrolling the AI boom.

SINGAPORE -- As chip giant Nvidia’s chief Jensen Huang stepped down on Thursday, investors’ biggest fears were as much about the future of the multitrillion-dollar company as its ability and willingness to continue bankrolling the AI boom.

Huang’s exit is yet another pressure point on the global markets’ most crowded trade and came after the board of the world’s dominant chipmaker, at the cutting edge of computing, met late on Wednesday to decide the longtime CEO’s fate after reports of his two extramarital affairs.

The company said Chief Financial Officer Colette Kress will take over as interim CEO as Nvidia looks for a permanent successor.

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, as the leadership upheaval at Nvidia boosted expectations that local chip suppliers could win greater market share. Moore Threads, MetaX and Cambricon all jumped nearly 10 per cent.

Nvidia shares pared premarket losses but were still down nearly five per cent at 1600 GMT.

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 centers, then the AI boom itself loses momentum.

“Nvidia has been called the ‘Bank of AI.’ They’ll sell you the chips and loan you the money. If they have to take a step back because of what’s going on, will that cut off funding to smaller companies that need it? That’s an open question,” said Joe Saluzzi, partner and co-head of equity trading at Themis Trading in Chatham, New Jersey.

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 per cent over the four years since the launch of OpenAI’s ChatGPT ushered in the AI era.

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