Nvidia After Jensen Huang: Is the AI Bubble About to Burst?

Travis Hoium (0:02)

What's the future at NVIDIA? Motley Fool Hidden Gems Investing starts now.

Welcome to Motley Fool Hidden Gems Investing. I'm Travis Hoium. Joined today by Lou Whiteman and Jason Hall. Guys, we have to talk about the news of the week and the markets because this is not impacting not only one of the biggest companies in the world, but also the entire market overall. If early trading in Friday is any indication, Jason, Jensen Wong is out as the CEO of NVIDIA. I'm going to start with a big question here. Where does NVIDIA go from here? This is probably a stock that a lot of investors hold either individually or through index funds because it's one of the biggest companies in the S&P 500 and the NASDAQ 100

Jason Hall (0:46)

There's a lot to unpack, but I think it's actually maybe a little bit simpler than maybe we think. It needs to really just keep doing what's happening.

I can't help but wonder, Travis, if one of the things that gets talked about is if it's maybe a really scary bad thing, is there's something like 60 executives and managers that rolled up to Jensen Wong. If that actually doesn't turn out to be good right now, because you do have that decentralized structure, you have to have a lot of functional executives that are really capable and empowered. So I think at a micro level, the business is probably going to be completely fine. It definitely gets more complicated when we talk about the product roadmap, how plugged in Jensen was into that, and then the broader role that he had is the financial backstop and the seed money. For so many marginal players that are deploying capital faster than they can raise cash flows, obviously the Neo Clouds come up to mind there.

And it sounds like Collette Kress is the long-time CFO and stepped in as the interim CEO, maybe is far more reticent to make those same investments. So threading that needle, pulling back too quickly could have a lot of second-order impacts that are bad for the value chain. So I'm really interested to see how that plays out, maybe more than anything else.

Lou Whiteman (2:11)

I think the product roadmap is so interesting because I don't believe that Jensen was involved in the development of the next AI chip. So I think that just the technology leadership, the smart people there, that will be fine. But what is made Nvidia special over the years, and we've talked about this a lot, is this is a company that was set up for gaming chips, that became a crypto company, that became an AI company. Jensen had a real sense of seeing where the wind is blowing and skating to the puck, being there before demand. And that's a very, very special skill. They've already started into that way with robotics, with kind of some things.

The question is, is that I don't think most human beings are as good at that as he is, and maybe not as bold enough. It's one thing to see where the wind is blowing. It's another thing to say, all right, here's a billion dollars, let's go find it. That's a rare quality in a CEO.

I don't know how you replace that. And if so, it does make me wonder about this as a 5, 10, 15 year investment.

I don't know about that. I think in the near term, as far as will the next AI chip be better than the current AI chip, I would say yeah, because I think the people that are doing that work have a pretty good track record and that's gonna continue. The longer term, I have no idea.

Travis Hoium (3:31)

Lou, I wanted to touch on the structure that Jason kind of alluded to. So what Jason is talking about is most big companies at this point, so you get to a several trillion dollar valuation, have an organizational structure where there's the sales department, there's the company that's working at AI chips, there's the division that's working on consumer chips. There's some sort of structure like that depending on what you're making.

Nvidia has a functional structure the same way that Apple did under Steve Jobs. So there's the engineering department and they're working on engineering the next products.

There's sales and finance and things like that. It all rolls up to Jensen Wong and he is, I think a good way to think about it is he is the editor. He's taking in all this information and making decisions. When you only have a couple of products that really matter, you can really do that. That is one of the reasons that Steve Jobs was able to structure Apple in that way. If you have, I mean, I worked at 3M. 3M has tens of thousands of products. There's no way that the CEO can have any thoughts about all of those products. So you have to go to a different organizational structure. Do you think that that is going to work in a world where you're rolling up to the XCFO? Because it seems like, I understand Jason's argument, that there are a lot of smart people under Jensen Wong. But there's also now no one at the top to say, okay, I'm going to go with Jason's idea and not lose idea. And sort of that power structure changes and the company was really built around him.