Nvidia investors may make peace with Jensen Huang affair sooner than you think

Gus Carlson is a U.S.-based columnist for The Globe and Mail.

The emerging sex-and-spy scandal around Nvidia’s chief executive officer, Jensen Huang, has investors in a bit of an ethical pickle – at what point does pillow talk trump profits?

News that Mr. Huang had been having an extramarital affair with a woman – and Nvidia customer – alleged to be a Chinese spy rocked the world’s markets, which for some time had considered Nvidia to be the darling of the artificial intelligence universe and Mr. Huang the wizard behind its curtain.

Under Mr. Huang’s leadership, Nvidia had become the second most valuable company on the planet, with a market capitalization of about US$4.5-trillion.

As a result, a lot of people have gotten rich quickly by investing in Nvidia.

Now, investors have a dilemma: Do they listen to the devil on one shoulder, suggesting that a personal indiscretion – even with a suspected spy – is no reason not to buy into a company Mr. Huang has led to fame and fortune? Or do they listen to the angel on the other shoulder, suggesting that a company led by a man of such low moral character – and perhaps someone who has created a credible national security risk – is no place to put one’s money?

Nvidia set to lose $470-billion in market value as Huang affair fallout deepens

Since the news broke on Monday, the angel has been winning: Nvidia’s share price sank as much as 6 per cent that first day, and is now down more than 10 per cent since before the scandal, wiping out billions of dollars in value.

But will the angel continue winning?

Investors looking to Nvidia’s board of directors for guidance should do so with caution. The board said this week it has launched an internal, independent probe into Mr. Huang’s conduct.

But many close to the company have reportedly expressed skepticism, believing that, because of Mr. Huang’s tight control of directors, the board may be hamstrung when it comes to reprimanding or even ousting him.

In another curious twist, the board said in announcing the investigation that it “has no reason to believe that either national security or Nvidia secrets were compromised.”

The record suggests that Mr. Huang’s affair has been known for some time. In mid-May, Culpepper Research released a report flagging the Nvida CEO’s ties to Ms. Huang.

About the same time, U.S. Secretary of State Marco Rubio warned senior Trump administration officials about Mr. Huang’s relationship with Alice Huang (no relation), a Chinese businesswoman suspected of being planted by the Chinese government to gather information on Mr. Huang, Nvidia and the U.S. strategy on AI. The company she represented, Megaspeed, contracted to buy US$2-billion of chips of Nvidia. And Mr. Huang had close ties to U.S. President Donald Trump.

Months earlier, other news reports linked the two businesspeople. Photos and videos of them socializing together in various venues in Asia are now popping up on social media.

The point is, the idea that the board is just now paying attention is hard to swallow, and its statement from earlier this week is exhibit A.

For his part, Mr. Huang has admitted the affair and apologized to his wife and family. That admission and apology, combined with the board investigation, are all textbook public relations tactics to which few serious people would give credence.

Unless the company is sanctioned in some way by the U.S. government because there is proof that its leader created a national security risk, will investors care? Should they? For his part, Mr. Trump doesn’t appear to care.

Opinion: Nvidia’s board signals Jensen Huang is too big to fire

Asked about the scandal by reporters, Mr. Trump was supportive of Mr. Huang and his performance in building Nvidia into a great American company in the highly competitive AI space. The President said he would invite the businessman to travel with him regardless of the situation.

But the point is made: Like any question at the intersection where ethics meet returns, the answer in this case is: It depends.

Some investors will take the side of the angel and risk missing out on the potential wealth creation that may come as Nvidia’s central role in the emerging AI market expands.

As the days go on, no one will be surprised if more investors side with the devil. If there’s money – big money – to be made, returns will trump virtue every time.

As Gordon Gekko might say, ethics, like lunch, are for wimps.