Nvidia after Jensen Huang: Will Big Tech’s ‘key man’ ethos live on?

If there is one incident that encapsulates the celebrity of Jensen Huang while simultaneously foreshadowing his downfall, it would be his appearance at a 2024 tech conference in his native Taiwan. Mr. Huang, the founder of Nvidia Corp., was swarmed by attendees who demanded photos, autographs, and a moment of his time. In a video of the encounter, a woman asks him to sign her shirt.

“You sure?” he asks, raising his eyebrows. “Is that a good idea?” He then appears to move a strand of the woman’s hair out of the way and writes his name in black pen on her clothing, right above her cleavage.

Normally, movie stars and musicians are asked to do such things, not a grey-haired, bespectacled tech executive, no matter how cool his leather jacket. But such was the aura surrounding Mr. Huang, who catapulted into CEO rock star status in recent years as the AI boom took off.

He is one of the handful of individuals most responsible for the AI era that is now reshaping the world. Nvidia’s chips, known as graphics processing units, are the workhorse of AI development. OpenAI, Anthropic and most every other AI company relies on Nvidia’s GPUs to build and run their models. The massive global demand for these chips have turned Nvidia into a multi-trillion dollar company and elevated Mr. Huang into one of the richest people on earth.

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He built a close relationship with U.S. President Donald Trump, and was able to influence American AI policy while travelling the world to meet with government officials in other countries, extolling the virtues of AI and the necessity for nations to build their own domestic computing power – preferably with Nvidia’s chips. His lengthy keynote addresses were must-see events, and his on-stage pronouncements could move markets and tank companies.

And now Mr. Huang has hung up his leather jacket.

He resigned on Thursday from Nvidia, the company he co-founded in 1993. He is no longer CEO, no longer a board member and is not even staying on as a consultant. His departure follows news of at least two alleged affairs with employees, and another with a woman named Alice Huang who U.S. intelligence has said is a Chinese spy, according to The New York Times. Authorities had also been investigating whether Ms. Huang’s company, the AI cloud computing provider Megaspeed International Pte. Ltd., was circumventing export controls by shipping Nvidia’s chips to China.

“The board did what we said it needed to do, which is rip off the band-aid,” tech analyst Daniel Ives with Yorkville Ives & Co. wrote in a note on Thursday.

Silicon Valley is a place built on rock star CEOs and personality cults. Some of the biggest, most influential companies centre around the men (and it’s always men) who lead them. There is, in this narrative, no Tesla or SpaceX without Elon Musk, no Meta without Mark Zuckerberg, no OpenAI without Sam Altman – who was ousted from his role in 2023, when the board said it had lost confidence in his ability to lead, before returning a few days later.

Similarly, there is no Nvidia without Jensen Huang. He has been CEO for more than 30 years, the only leader the company has ever known. He had deep engineering knowledge, struck deals with customers, crafted strategy, funded the AI ecosystem, and fraternized with politicians. He led Nvidia in an unorthodox way, with a flat structure and some 60 direct reports. In Silicon Valley, that in-the-weeds style of management has gained the approving nickname of “founder mode.”

There is tremendous uncertainty around who could possibly replace Mr. Huang and lead Nvidia, especially because it appears the board has no succession plan in place. His departure will test a core ethos in Silicon Valley: That founders are irreplaceable, and companies fare worse without them. How key are these key men, really?

Some of Mr. Huang’s fellow founders are mourning his exit. “Generational blunder,” Shopify founder and CEO Tobi Lütke wrote on X when Nvidia announced Mr. Huang’s departure. “Nvidia ends today, and is replaced with a thing cosplaying Nvidia. It will be run by custodians trying and failing to preserve the flame he ignited.”

X is replete with people who work in tech wishcasting Mr. Huang’s return to Nvidia, in fact. “China wants Jensen out, so I want him in,” Palmer Luckey, founder of the defense tech company Anduril Industries posted on X. Wired reported on Thursday that some Nvidia employees are petitioning for him to come back, too. On X, Mr. Musk expressed his support to reinstate Mr. Huang as well.

Mr. Huang, 63, may have been the company’s founder and face, but he did not have majority voting control of Nvidia. The chief executive owned 3.58 per cent worth of Nvidia’s outstanding shares as of March, which left his fate to the board.

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That’s one way in which Mr. Huang differs from many of Silicon Valley’s other key men, who have engineered share structures that keep them in control. It’s partly an artefact of timing. Nvidia went public in January 1999, during the dotcom boom. Five years later, Google’s IPO shocked the markets by proposing to give co-founders Sergey Brin and Larry Page special stock – 10 votes per share to the single one granted to the retail investors that bought into the offering. Together with some hand-picked executives, they’d control 83.6 per cent of the voting power at the company.

Google’s listing set a precedent. Facebook, Snap and more recently SpaceX went public with dual-class share structures. Shopify did too, then further entrenched Mr. Lütke’s control in June 2022 by issuing him a special “founder share.” The mechanism ensures he will have 40 per cent of the votes even if his equity stake drops as low as 1.1 per cent. Proxy advisory firms opposed the move.

While Mr. Huang was not so entrenched, many analysts argue he was key. “He consistently had Nvidia pushing boundaries of what you could do,” said Matt Bryson, managing director for equity research at Wedbush Securities. “Nvidia was an important presence in moving technology forward, and he was the most important presence at Nvidia.”

Mr. Bryson said interim CEO Colette Kress is well respected on Wall Street from her long tenure as CFO, but that there are likely to be questions about where the firm’s technical leadership will come from following Mr. Huang’s exit, even if he does not expect the transition to dent Nvidia’s momentum. “This is certainly a road bump,” Mr. Bryson said. “To some extent everything’s changed, but nothing’s changed.”

Mr. Huang has, in the past, likened Nvidia to a Formula One race car, one in which he was the driver.

“Everything in Nvidia was tuned to support Huang when he had the wheel,” wrote Morningstar analyst Brian Colello. “We are concerned whether the Nvidia racecar will remain finely tuned going forward. Someone who can match Huang as, say, a technology visionary might not be as successful in other areas where Jensen excelled, such as dealmaking or motivating a business unit.”

Still, Paul Kedrosky, a managing partner with SK Ventures, doubts that Mr. Huang was truly so key that the company will be in peril as a result of his resignation. The lead times in the semiconductor industry are lengthy and the product roadmap is well established. “Nvidia is a machine at this point,” he said. Mr. Kedrosky is also bearish on the AI industry and said that Nvidia is facing financial and market challenges that will persist with or without Mr. Huang.

Founders establish a company’s reason to exist. They are typically the ones who spotted an opportunity, and turned it into a business. Since they start with nothing, they’re often dreaming of the long term. “When you lose that vision of how the company will evolve and be something much, much larger in 10 years, often the company fails to flourish and reach its full potential,” said Janet Bannister, founder and managing partner of Toronto-based Staircase Ventures, which invests in tech startups.

Still, Ms. Bannister believes in succession plans, and is against dual-class share structures. “I do believe in the importance of the founder,” she said. “But it doesn’t mean that every founder will forever be the very best person to control the company.”

Apple provides ammunition on both sides of the argument about founder irreplaceability. The multinational tech company known for its smartphones and computers famously floundered after its board fired co-founder Steve Jobs in 1985. After he returned in September 1997, Apple produced the iPod, and then the iPhone. The rest is consumer electronics history. But in 2011, with Mr. Jobs seriously ill, Apple picked Tim Cook as his successor. The company grew to become one of the world’s most valuable. So successful was Mr. Cook’s tenure, that Mr. Trump is calling for him to take over at Nvidia.

Academic researchers have documented the risks of rockstar CEOs, especially when they start to believe the narrative around them. In 2004, a trio of university professors in the U.S. published a paper in the Strategic Management Journal arguing that when the media overattributes successful outcomes to a CEO, that same CEO can internalize the message and “become overconfident about the efficacy of her past actions and future abilities.”

Whether it was a sense of invincibility that led to Mr. Huang’s downfall is a matter that will be picked over for some time. Though he and Nvidia have officially parted, their fates are still entwined. There are unanswered questions about his relationship with the alleged spy, how much he knew about chip shipments to China, and the sustainability of Nvidia’s financing deals. He has already been summoned to testify before the U.S. Senate Banking Committee.

“This is maybe the tip of the iceberg,” said Benjamin Butler, an analyst at Veritas Investment Research. “I think we’re going to continue to see more and more issues arising.”

The key man may prove to be key for a while yet.