Morningstar warns: If Jensen Huang leaves NVIDIA Corporation (NVDA.US), AI deals and financing activities could be dragged down.

Morningstar said on Tuesday that if NVIDIA Corporation (NVDA.US) Chief Executive Officer Jensen Huang leaves, it could trigger a chain reaction across the entire artificial intelligence (AI) industry, weighing on AI deals and financing activities. Brian Colello, senior equity analyst at Morningstar, wrote in a report on Monday: "We have always believed that NVIDIA Corporation and Jensen Huang are at the core of the AI ecosystem. His departure could lead to reduced deal activity and financing in the AI sector, increased regulatory scrutiny, and stronger political backlash surrounding artificial intelligence." He added that NVIDIA Corporation's investigation into Jensen Huang "could lead to" the CEO's departure. The risk this incident poses to the entire AI industry lies in the fact that NVIDIA Corporation has become a core node in the global AI industry's capital, technology, and supply chain networks. In addition to supplying chips to AI companies worldwide, NVIDIA Corporation has also participated in the development of upstream and downstream segments of the industrial chain through investments. Its investment targets include companies such as OpenAI, Anthropic, xAI, CoreWeave, and Nebius. In August this year, NVIDIA Corporation also signed preliminary agreements with institutions including Apollo Global Management Inc, BlackRock, Inc., Blackstone, Bruker Corporation, Goldman Sachs Group, Inc., and KKR, planning to mobilize more than US$500 billion in funding in the future. Jensen Huang previously said that NVIDIA Corporation may provide support for up to a quarter of that funding. This means that once a serious leadership crisis emerges at NVIDIA Corporation, its impact may not be limited to the company itself but could also spread to numerous companies that rely on its chips, investment, and financing support. Despite the lingering uncertainty over whether Jensen Huang will stay or go, Morningstar maintained its fair value estimate of US$310 per share for NVIDIA Corporation and its four-star rating, indicating that the institution believes the stock is currently undervalued. Morningstar said demand for AI computing power still exceeds supply and expects the investigation will not affect NVIDIA Corporation's revenue in the short or medium term. Colello said: "We also cannot rule out the possibility that the investigation gradually fades from public view and NVIDIA Corporation returns to normal business operations." However, Morningstar did include the investigation and the alleged espionage activity among the risk factors supporting its "very high" uncertainty rating for NVIDIA Corporation. Jensen Huang's future is key On November 8, Jensen Huang sent an internal letter to all employees, admitting infidelity to his wife and apologizing to his family, employees, the board, partners, and shareholders. Reports said the woman involved in Jensen Huang's extramarital affair was an asset of a foreign intelligence agency. NVIDIA Corporation's board announced the same day that it had established a special committee composed of independent directors and launched an independent investigation with the assistance of outside independent legal counsel to determine whether Jensen Huang had become a target of a foreign intelligence agency operation. The board said there is currently no reason to believe that national security-related interests or NVIDIA Corporation's core trade secrets have been harmed, but the special investigation will still verify all available information one by one. John Rizzo, NVIDIA Corporation's head of public policy communications, stated clearly that the relevant news "will not slow NVIDIA Corporation's pace of development at all," and that Jensen Huang will continue to serve as chief executive officer and advance all established business without interruption. Until the independent investigation reaches a final conclusion, Jensen Huang will perform all the duties of CEO normally. Meanwhile, NVIDIA Corporation and Jensen Huang face a shareholder class action lawsuit accusing them of defrauding shareholders. The plaintiffs claim that Jensen Huang had an extramarital affair with a former executive of a Singapore data center company (Megaspeed). NVIDIA Corporation and Jensen Huang himself did not publicly disclose this personal relationship to outside investors, thereby damaging the company's reputation and future business prospects. The plaintiffs are seeking legal liability and compensation from NVIDIA Corporation and Jensen Huang, but the complaint has not yet specified the exact amount claimed. Amid the fallout, whether Jensen Huang stays or goes has become a market focus. NVIDIA Corporation is a typical case of a founder controlling a company with a relatively small equity stake. Although Jensen Huang's stake is not high (about 3.6%) and consists entirely of common stock, NVIDIA Corporation's ownership is highly dispersed, the company had not previously experienced a major control dispute, and Jensen Huang has served as CEO for more than 30 years. "Pessimists" believe the loss of Jensen Huang would be "immeasurable." Dan Gallagher, an analyst who has long tracked the chip giant, said: "It is hard to imagine anyone else running NVIDIA Corporation." Analysts noted that Jensen Huang has more than 60 direct reports, does not use a traditional multi-layered hierarchy, and has never publicly groomed a successor. "Without him, no one would know how to value NVIDIA Corporation." But "optimists" believe that even if Jensen Huang leaves the company in the future, NVIDIA Corporation could still achieve great success in the coming years. When asked how important Jensen Huang is to the future development of this AI chip darling over the next few years, Dan Niles, founder and investor of Niles Investment Management, said he "is not important." Dan Niles said: "Jensen Huang's team is full of talent. The development of Apple Inc. after Jobs' death is a good example... Did it collapse?" "So, Jensen Huang has done an excellent job in empowering his subordinates. I think one thing that will happen next is the appointment of a successor. The board will enforce this process. So I think this matter will ultimately fall into place." Jeffrey Sonnenfeld, a professor at Yale University, said the probability of Jensen Huang continuing as chief executive officer is "50-50." He noted that previous CEO departures were not necessarily due to public opposition to their infidelity, but rather concerns about trust issues and information disclosure. Sonnenfeld said in an interview that Jensen Huang has long enjoyed a high reputation in the tech industry and has been widely respected and trusted, but the problems exposed by this incident, in his view, constitute "extremely poor judgment." Sonnenfeld believes that even if Jensen Huang was merely kept in the dark, such behavior itself could damage internal trust at the company. He noted that other NVIDIA Corporation employees involved in similar security issues could face dismissal, and Jensen Huang, as chief executive officer, should bear a higher responsibility. However, Jensen Huang also has advantages that other executives find difficult to match. Since co-founding NVIDIA Corporation in 1993, Jensen Huang has led the company's growth into one of the world's most important AI chip suppliers, and the track record and reputation he has built over time may become important chips for him to weather this crisis. But if the investigation proves that he knew about the relevant risks, or that his conduct crossed the bottom line of company security and governance, that trust capital could also be quickly depleted. Beyond whether Jensen Huang can stay, if NVIDIA Corporation needs to replace its CEO, who will succeed him is also a difficult question. Sonnenfeld noted that Jensen Huang has long deliberately maintained a relatively flat management structure. Although this management approach helps maintain decision-making efficiency, it also makes it difficult for outsiders to judge which executives within the company are capable of succeeding him. In addition, Sonnenfeld expects that even if Jensen Huang ultimately retains the chief executive title, he may need to hand over some day-to-day management and decision-making responsibilities to other executives. He also noted that Jensen Huang does not hold super-voting shares that could ensure his control. If NVIDIA Corporation's board ultimately deems it necessary to replace the chief executive officer, Jensen Huang has no institutional safeguard through special voting rights to block such a decision.