Nvidia’s Hard Reset

Ian Krietzberg (0:01)

I think it's absolutely going to be a problem for them. I think the question is short term versus long term, right? Will they be able to get out of this and regain the trust of the ecosystem, of the US government, of global governments, of customers?

Peter Hamby (0:22)

Welcome to The Powers That Be Daily, Puck's podcast focused on the intersection of Wall Street, Washington, Silicon Valley and Hollywood, and the players who run it all. I'm Peter Hamby. It's Friday, November 13th. Today, I'm joined by Ian Krietzberg to break down the stunning fall this week of Nvidia CEO Jensen Huang, who resigned from the company after two affairs were revealed, including one with an alleged Chinese spy. Ian tells me what's next for Nvidia as they try to climb out of the sudden financial and PR hole they've found themselves in. We also take a look at Anthropic's big IPO hitting Wall Street next week, and Ian has some thoughts about whether Democrats can follow through on their promises to regulate AI in Washington. We'll discuss all that and much more on today's episode of The Powers That Be.

Happy Friday, everybody, and welcome to The Powers That Be. We got a big story in the world of AI. Jensen Huang is out as head of Nvidia. It happened overnight, Wednesday, Thursday, as the board at Nvidia announced or leaked to the Wall Street Journal that they were thinking about ousting Huang after news of a second affair broke. With a senior executive working on the health care business, Kimberly Powell, this of course comes after the gigantic geopolitical intelligence scandal, where he was linked apparently to a Chinese spy. Donald Trump apparently knew about it. But even with all of that, Ian, you know, there was chatter just a few days ago that Huang might survive this, even though it was causing material damage to the company and their bottom line. Then the HR violation hits and he's out.

You know, you can't have an affair. You get one affair. Yeah, you get one affair with the direct report.

Sorry, actually, you get zero affairs with the direct report, but you can't have an affair with a spy. Is that your read on the situation that maybe the board was looking for an excuse? And this news, the second affair, gave them a reason to try to push them out.

Ian Krietzberg (2:41)

That's definitely one read on the situation. You know, I've spoken to a couple of people about this, and some are thinking that we're talking about one of the largest companies in the world.

We're talking about Jensen, who is one of the most influential people at one of the largest companies in the world. It's a little hard to imagine that these things happen completely overnight. Obviously, the scandal intensified. But also, if you read the reports on the second scandal, apparently people at the company knew about it.

The recording, the video that caught them quote being affectionate together was taken in March at GTC.

That one doesn't seem that it was as much of a surprise to the board as the Chinese spy influence operation was. That one seems to have caught them more by surprise, but it's not an impossibility that maybe they were looking for a new direction post-Wong, and this is a really clean way to create a clean break. And that's what some sources are kind of talking about now, which is Jensen and Nvidia have spent the past couple of years making a lot of enemies in Washington. They've been really intense about their push all around China on export restrictions, on who they're allowed to sell to and when, and they've pissed a lot of people off. And now, I mean, I don't think it's a coincidence that everything is happening at the same time, right? You have new Democratic leadership coming in. This new caucus has already said, hey, we're interested in investigating AI companies, Silicon Valley, Big Tech already. Then the news about Jensen starts coming and they say, hey, we're going to jump on this for sure. So there's a kind of shifting in the political winds around how Silicon Valley engages with Washington. And so maybe there's an opportunity here to kind of clean break the way that Nvidia has been engaging with Washington and switch into a different approach that's maybe not quite the way that they've been doing business with Trump and with DC beforehand. And so yeah, this could be a movement into a different era for sure, I think, for Nvidia.

Peter Hamby (5:00)

Yeah, I mean, most tech CEOs, I think, need to be thinking about dealing with the Democratic Congress and possibly a Democratic president in the next few years. So this gives them an opportunity to pivot, even though it's probably not the way they want to do it. The stock price is down 25 percent in just a week after the news of the Alice Wong story broke. Their CFO has been appointed interim leader. I believe her name is Collette Kress. They're going to search for somebody else to lead the company.