Jensen Huang's exit from Nvidia raises critical questions about the future of AI

Michael Dell described Jensen Huang as a "visionary of the AI age." Deutsche Telekom CEO Tim Höttges said a photo with the Nvidia CEO produced more media coverage for his company than its iPhone launch. During the keynote of his annual Dreamforce conference, Salesforce's Marc Benioff said, "Jensen, we're all following you, bro," as the two paced through the audience.

His fame extended way beyond tech. In May, Jensen Huang joined President Donald Trump on Air Force One for a trip to China to meet with President Xi Jinping. Three months later, Jensen Huang gathered six of the biggest names at the Nasdaq to announce on CNBC a proposed $500 billion artificial intelligence buildout plan, cementing his central role at the intersection of Wall Street and Silicon Valley.

As Nvidia became the first company to rip past a $5 trillion market cap, bending the laws of physics with its advanced graphics processing units and pushing the AI boom to seemingly endless bounds, the now 63-year-old Jensen Huang, clad in a black leather jacket, traversed the globe as the face of the brand powering the next industrial revolution.

Over the past week it all came crashing down. Following two reported extramarital affairs — one with an alleged Chinese spy and another with an employee — Jensen Huang is leaving the company he co-founded 33 years ago in crisis, and thrusting the AI market into chaos. The board is now left to pick a successor for a company that's been run by a singular figure with no second-in-command. Chief Financial Officer Colette Kress has been named interim CEO. Harvey Jones has been appointed chairman.

Nvidia has not responded to multiple requests for comment.

"How companies handle a crisis determines their future," former Cisco CEO John Chambers, now a startup investor, told CNBC's "Fast Money" on Wednesday. "How they handle this will determine if they're a great company and a great leadership team beyond one person."

It had been a tumultuous stretch for Nvidia, even before the Jensen Huang saga led the board to launch an investigation of the CEO's behavior and the potential national security implications. The stock is on pace for its sixth straight weekly drop, which would be the longest losing streak since 2012. That includes a 9% slump last week after the midterm elections resulted in sweeping Democratic victories in both chambers of Congress, and the passage of dozens of ballot measures that could slow the buildout of new data centers.

Nvidia is scheduled to report quarterly results on Tuesday, and expectations remain high, with analysts projecting 92% year-over-year revenue growth to $109.2 billion, according to LSEG. That's up 18-fold from the same quarter in 2022, just before OpenAI launched ChatGPT and kicked off the generative AI era.

It's a historic level of growth for any business, and particularly notable for a company that spent most of its first few decades as a niche technology provider for video games.

Jensen Huang founded Nvidia to make chips for computer graphics, both for video games and rendering. In the early 2000s, he and other executives saw an opportunity to put GPUs to work for computationally intense projects. That technology eventually turned Nvidia into the most important player in AI and a key American asset for national defense.

In the process, Jensen Huang became the ultimate decider, choosing how, when and where GPUs get allocated. The biggest buyers were the hyperscalers — Amazon, Google, Meta and Microsoft — which needed the chips to build their own AI services and make them available to cloud customers. OpenAI, meanwhile, was snapping up GPUs for its powerful models and consumer apps.

To expand his customer base, Jensen Huang designated compute capacity to a number of so-called neoclouds like CoreWeave and Nebius, putting equity into the companies and helping them build big businesses around renting out GPUs.

Oracle gobbled up billions of dollars worth of GPUs, going heavily into debt in the process. Elon Musk's xAI, now part of SpaceX, did the same to build its Grok model, before eventually starting to rent out excess capacity to Anthropic and Google.

Jensen Huang wanted the world standardizing on Nvidia. Last year he demanded that Oracle buy additional Nvidia networking hardware if it wanted allocation to its state-of-the-art Grace Blackwell chips, said two people familiar with the deal who asked not to be named because the negotiations were private.

In August, Nvidia said it will provide up to $105 billion in financing for an OpenAI data center in Ohio that could be the largest of its kind in the world.

"He created the product that started the industry," said Chris Miglino, CEO of neocloud Axe Compute. "Without his leadership we may be many years behind where we are today with AI chip technology, which is the driving force behind the neocloud market."

When it comes to investing cash in fledgling startups, Jensen Huang is known to host entrepreneurs at Nvidia's Silicon Valley headquarters. While there could be 30 Nvidia employees in the room for the pitch meeting, only Jensen Huang asks questions, according to people with knowledge of the matter, who requested anonymity because they're not authorized to speak publicly about it.

One source told CNBC that key aspects of project finance are so reliant on Jensen Huang's sign-off that, when he travels, those involved in the deal are forced to wait for his plane to land before learning if they can go forward or if terms have to be renegotiated.

Jensen Huang's ambitions extended well beyond the U.S. He wanted to be a force in China, which became a difficult market for Nvidia during the Biden administration and was virtually off-limits after Trump implemented strict export controls in his second term. Jensen Huang's aggressive pursuit of China may have been his undoing.

Alice Huang, with whom the Nvidia CEO had a romantic affair, was identified by U.S. intelligence as having been recruited by China's Ministry of State Security to gather information on Jensen Huang, according to people briefed on the intelligence cited by The New York Times. She has business ties to Megaspeed International, a Singapore-based cloud computing firm and an Nvidia customer that's facing scrutiny over suspicions that it facilitated billions of dollars of restricted Nvidia chips to China.

U.S. lawmakers are up in arms, with many demanding investigations as well as Jensen Huang's resignation. Senate Banking Committee member Kevin Cramer, R-N.D., vocalized his concerns on Wednesday.

"What bothers me at the end of it is what we don't know is what she knows about him that can be utilized," Cramer told CNBC, right before Jensen Huang resigned and referring to the affair. "This is a guy that's right now so vulnerable to extortion, blackmail. I just don't think, as a national security matter, we can run the risk." 

But industry experts are quick to emphasize how important Jensen Huang was to the health and growth of the broad AI ecosystem. He had the leading names on Wall Street on speed dial as he tried to turn GPUs into what he called an "investable asset" with an expanded roster of financial backers, and he had personal relationships with all the key figures in AI like OpenAI's Sam Altman and SoftBank's Masayoshi Son.

On the deal-making side, Jensen Huang's top lieutenants were finance chief Kress and Vishal Bhagwati, head of corporate development, sources said, though they add that all the big decisions were made by the CEO. And when seeking a financial backstop, the person behind Jensen Huang was Nico Caprez, the CEO's son-in-law and the company's vice president of global AI infrastructure growth, three people said.

Executives at numerous Nvidia customers, partners and portfolio companies told CNBC that Jensen Huang frequently emailed or called CEOs to offer his help in challenging times.

Tomás Puig, founder and CEO of enterprise AI startup Alembic, said that following the collapse of Silicon Valley Bank in 2023, his company was "down to weeks of cash and Nvidia was our biggest customer."

"I emailed Jensen, and they prepaid two years of invoices so we could keep the lights on and people kept their jobs," Puig told CNBC.

That approach persisted, as recently as this week. On Monday, a day after publicly apologizing for being unfaithful to his wife, Jensen Huang emailed the CEO of AI infrastructure startup Fireworks AI, according to a person with knowledge of the matter. Fireworks, which Nvidia first backed in 2024, was dealing with a series of high-profile cyberattacks.

Jensen Huang, whose name was suddenly front-page news for all the wrong reasons, was checking in, the person said, just to see if he could help.

— CNBC's Lora Kolodny, Jordan Novet and Seema Mody contributed to this report.

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