Is Jensen Huang too big to fail?

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Brendan Bordelon (0:33)

Hello, and welcome to Decoded by POLITICO. I'm Brendan Bordelang.

Sam Sutton (0:37)

And I'm Sam Sutton. Today on the show, NVIDIA CEO Jensen Huang faces an investigation from his own company over his affair. But can anyone actually replace the powerful AI company CEO?

Brendan Bordelon (0:47)

Plus, my conversation with Biden's former AIs are on what Democrats should do on AI policy now that they have strong incoming majorities in Congress.

All right, Sam, we are on day two of the Jensen Huang affair fallout. I wonder before we dig into the latest, if we should back up a little bit and start this conversation with a history lesson on Huang himself. Why is he considered such a powerful force within NVIDIA and really across the entire AI economy?

Sam Sutton (1:16)

Jensen is a co-founder of NVIDIA, and as opposed to CEOs at a lot of companies, he has taken a very hands-on approach to management. And that's true not just from being a public face perspective, but also from engaging directly with policy makers, working kind of like hand in glove with a lot of folks on the financing side of the business, clearly playing a key role in the development of bleeding edge chips that are a huge advantage for the USAI industry.

Brendan Bordelon (1:46)

So given the severity of the scandal facing Jensen and the company, what does this future look like?

Sam Sutton (1:52)

Well, the first thing I want to point out here is that other CEOs have been felled by much less serious allegations. And it's really notable to me that NVIDIA has stuck by its CEO, even amid the political fallout that it's getting from his purported involvement with someone who's alleged to be a spy for China, and may have been funneling the company's technology to China. So let's start there. I think that that is a testament to how Jensen has operated at NVIDIA for the last several years.

We cannot overstate how important he is as a personality and deal maker in the AI financing ecosystem. He was the force behind the $500 billion third-party financing arrangement that was made with Brookfield Asset Management, KKR, Goldman Sachs, a number of other firms that are now key players in supporting the AI build out. That's on one front. On the other front, he is, and I had some conversations with former administration officials today, as opposed to other companies that have huge policy shops and who deploy kind of like behind-the-scenes power brokers to engage with government officials. He is the point person when it comes to setting AI policy. So there's that bucket too.

And then the third bucket, probably the most important to the AI story at large, is the fact that he's overseeing a company that's developed GPUs that are vital to open AI, vital to Anthropic, vital to basically anybody who is working on large language models right now. So when I went around to folks on Wall Street today to kind of ask about sort of how they were thinking about this scandal and what it might mean for NVIDIA moving forward, you know, the consensus view was that he's probably going to survive this, even though this is a very, very negative story, even though this is potentially a very bad story. He's just viewed as too vital and too important to the company.

Brendan Bordelon (3:58)

NVIDIA stock did drop today, it should be said. So it's not like Wall Street is just hunky dory about everything that's going on. There is some concern here and I think certainly a sense that NVIDIA is at risk. Anybody that you talked to in Wall Street about the dip, I'm curious what their reactions were, particularly how it sort of flushes with the sense you're getting that he's likely to survive this and the company is likely to weather this pretty hairy situation.

Sam Sutton (4:19)

And I should say likely to survive this based on what we know right now. NVIDIA has launched an external investigation, so we might find out more, NVIDIA might find out more. So as it stands, NVIDIA's board has said that it is confident in Huang and confident in his leadership team. I had a conversation with Eric Wallerstein on Monday. He is a former advisor to Steven Myron, who was a former Federal Reserve Board member and top advisor to President Trump. He's now at Clock Tower, the chief macro strategist there. And he made the point to me that there might not be a point in getting rid of Huang, even in light of all of what we've learned. And what he said exactly was like, if you're NVIDIA, do you save yourself the congressional headache and potentially legal headache? Doesn't seem like it. You're going to have that either way. Do you save your stock? Probably not. So then it becomes a question of whether or not keeping Huang on, this is somebody again, whose shareholders clearly value, is worth whatever pain would come from Washington or externally from that decision. And so ultimately, it's going to be on the company to determine whether or not the pain that they're going to withstand from keeping him on is going to be worth the pain that they would feel from letting him go.