Behold, a tech revolution crashes because the big man can’t keep it in his pants

John Rapley is a contributing columnist for The Globe and Mail. He is an author and academic whose books include Why Empires Fall and Twilight of the Money Gods.

It would be the supreme irony if the technological revolution that was supposed to liberate intelligence from human bodies and send it to unimaginable heights were brought back to earth by a man who failed to keep it in his pants.

Yet the revelation that Nvidia CEO Jensen Huang had been conducting an affair with a suspected Chinese spy – plus an employee directly reporting to him – raises that very possibility. Mr. Huang resigned on Thursday.

It’s hard to overstate just how central to the AI boom Jensen Huang was. Head of the world’s first business to surpass a market capitalisation (the value of all its shares on the stock market) of US$5-trillion, Mr. Huang played a role akin to the conductor of the AI orchestra. Not only did the company he co-created make the “picks and shovels” of the AI gold rush, which is to say the advanced chips being used in the data centres operating AI, he invested widely in AI startups, having sunk nearly US$100-billion into the companies that buy its chips. As they bought its chips, they drove up Nvidia’s revenues, making it possible to keep this circular financing going.

Sitting at the centre of this ecosystem, he also sat at the centre of Nvidia itself. Similarly to other companies run by tech oligarchs, such as SpaceX and Anthropic, his power at Nvidia made him almost inseparable from the company: his board had no chairman, there was no succession plan for his replacement, and an unusually large number of senior executives reported directly to him.

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From that lofty perch, he wove a web of political ties as tight as his economic ones, forging close links to U.S. President Donald Trump. He then used that influence to secure policies favourable to both his company and the AI sector, such as hands-off regulation and eased controls for the sale of chips to China. The U.S. intelligence community had wanted to limit China’s access to the most advanced American chips, but Mr. Huang promoted a softer stance toward China, saying the two countries had much to share in getting close.

Ahem, getting close indeed. News of his affair with a Chinese woman that the U.S. intelligence community believes may be a spy now sets the stage for a Hollywood spy drama. The New York Times reported this week that Mr. Trump had been repeatedly briefed about the risks but chose to do nothing about it. Given Mr. Trump’s known proclivity to trade favourable policies for gifts, the incoming Democratic Congress will be keen to probe this brewing scandal. At some point, the old Watergate question – what did the president know and when did he know it – will likely arise.

All this is unfolding against the backdrop of a stock market that has grown nervy. After a blistering four-year rally which saw an average annual rise of 17 per cent, the U.S. stock market plateaued last spring and has traded sideways since. Given the high degree of the market’s concentration in the AI sector, what happens there will eventually happen everywhere.

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Since peaking early this summer, the index of AI stocks has fallen some 20 per cent. Driving the fall have been rising debt costs, growing investor fatigue with promises of future productivity gains that have yet to materialise, and a “techlash” by voters who don’t want data centres in their backyards and are tired of hearing the tech bros boast that they’ll put them all out of work before then killing them in an AI-engineered plague.

Nvidia’s fall from grace has been especially harsh, its share price having fallen some 25 per cent since its summertime peak, thereby knocking US$1.5-trillion off the company’s value. The question now is, if this continues, could Nvidia’s tangled political and corporate webs bring the whole market down with it?

Once it emerged that Mr. Huang had also been conducting an affair with one of his executives, his time was up. But while Mr. Huang resigned on Thursday, he had become so personally central to the AI boom that it’s hard to imagine a successor continuing to orchestrate the rise of AI quite the way he did.

When markets opened after his resignation on Thursday, Nvidia’s share price plunged another 15 per cent – nearly US$400-billion of value gone. But when it comes to the broader AI revolution, investors are still keeping faith, but only just. When Anthropic announced it would go ahead with its IPO this month, it helped steady the market: had it postponed, it would have sent shockwaves through the market.

But now Anthropic must deliver. If the AI startup succeeds in attracting the capital it is aiming for, investors will be assured this rally still has life in it. If it fails, hold on to your hats. This roller coaster will have just slowed across the peak bend and could be headed for a sharp fall.