The Nvidia Shock and Britain’s Housing Problem

Merryn Somerset Webb (0:02)

Bloomberg Audio Studios, Podcasts, Radio, News. Welcome to the Merryn Talks Money Market Wrap, where we talk about the biggest moves in the markets this week and what is driving them. I am Merryn Somerset Webb, UK Money Editor at Large.

John Stepek (0:28)

And I'm John Stepek, Senior Reporter at Bloomberg and author of the Money Distilled Newsletter, which has occasionally been described as award-winning.

Merryn Somerset Webb (0:37)

Go you, John. Now listen, John, as an award-winning person, if you were caught having an affair with someone who may or may not be a Chinese spy, would you resign from your position as the editor and author of the Money Distilled Newsletter award-winning or not? I mean, would you? Or would you just brave it out? Keep going.

John Stepek (0:56)

I mean, I think I would definitely brazen it out until it turned out that I had also been having an affair with or subordinating it. And I think then by that point, I might struggle to keep the show on the road with a straight face.

Merryn Somerset Webb (1:11)

Fair enough, which brings us neatly to...

John Stepek (1:15)

Yes, yes. I think it's the only market story of the week, really, isn't it? Yes.

Mr. Jensen Wong has actually literally as we're going on here, just resigned as the Chief Executive of Nvidia.

Merryn Somerset Webb (1:31)

So it's been a really, really tough week for Nvidia shareholders. I mean, actually, to be fair, there was a lot going on before the resignation, a lot going on before the revelations about the affairs and the shares are already down 20 percent or so in a month. We are speaking just before the market opens on, what day is it, Thursday, just after the resignation and in pre-market, it's down around 8 percent. So if you hold those shares directly, you have lost a lot of money. But if you've been listening to our recent podcast series on Portfolio Reset, you will know that even if you do not hold the shares directly, and even if you do not know you hold the shares, you've also lost a lot of money, haven't you John?

John Stepek (2:12)

Yeah, you have. Just the other day, I was pointing out that Nvidia, it's actually only the second biggest stock in the S&P 500 By the time, it had already fallen 20% odds behind Apple. But yeah, the £7 out of every £100 you have in an S&P 500 tracker is in Nvidia. And if you're talking about the top 10, kind of magnificent seven stocks, which I know mostly is the magnificent seven in the top 10, then it's more like £40 out of the £100.

Most people will have some Nvidia in their portfolio. There's nothing wrong with having one of the biggest stocks in one of the biggest sectors and one of the biggest economies in the world in your portfolio. But the point is, this is a stock that is almost universally owned by anyone who owns shares. So it's a big, big deal whenever something like this happens.

Merryn Somerset Webb (3:04)

Yeah, and it's a bigger deal for a company like Nvidia than it is for most companies. You get your average giant company with a manager CEO, someone who's been put in place after the creation of the company and maybe post its major growth phase, and you find out that the CEO has been up to no good and he's chucked out and they look for a new CEO. And that's a matter of three, four, five percentage points, right? It's not such a big deal. But when you have something like this, where you've got a founder CEO and you have, I mean, their last proxy statement on this matter, we are highly dependent on the services of our longstanding executive team. There's the risk stated by the company upfront and now you no longer have the man who's both the founder hero and the top of that management team. It makes a very significant difference.

John Stepek (3:54)

Well, yeah, and it is interesting about the management team because there was a very good chart on Bloomberg the other day. We'll just point out that he had 60 direct reports. The average direct report for an S&P 500 company is 14 So in other words, he's got a whole load of people who report directly to him.

He had no, I mean, obviously, they've got an interim CEO just now, but he had no obvious successor. You know, there's people in most of the big companies who you would say, and including the Mag 7 ones, who you would say, right, okay, that's the person who would be the go-to if the CEO, you know, something happened to them. But it's definitely not the case with Jensen Huang. And that's where, I mean, well, I suppose the concerns come from two areas, don't they? The one is, he is very much a key man in this company.