Nvidia's Founder Transition May Be Harder Than Apple's or Alphabet's

Jensen Huang's sudden resignation leaves Nvidia facing an unusually difficult founder transition, experts told CNBC, after he made the company he co-founded the world's most valuable in 33 years.

Huang resigned on Thursday amid reports of extramarital affairs, including with a woman U.S. intelligence believes is a spy for China, according to the report. CFO Colette Kress is serving as interim CEO while the board searches for a permanent successor. Michael Withers, professor of management at the University of Notre Dame's Mendoza College of Business, told CNBC he was not sure a situation quite like this had been seen before, where the founder and CEO of one of the world's largest companies faces such a sudden departure amid scandal.

Companies like Apple, Alphabet and Uber have prospered after losing high-profile leaders, but those transitions were generally less abrupt. Apple's image was inseparable from Steve Jobs when he resigned in 2011, but the company had had other CEOs and an internal successor: Tim Cook, who invested in Apple's chip strategy and services business and controlled its supply chain. Apple's market cap went from about $350 billion to $4 trillion in his 15-year tenure. Larry Page and Sergey Brin left their executive roles at Alphabet in 2019, 21 years after founding Google, in what Page called the natural time to simplify management; Alphabet shares are up more than 300% since then under Sundar Pichai. Travis Kalanick left Uber in 2017 after mounting pressure over scandals and governance concerns, but his departure unfolded over several months, which Withers said pales in comparison to what Nvidia is currently facing; former Expedia CEO Dara Khosrowshahi then repaired the organization and found a path to profitability.

What's different about Huang's departure is the combination of a high-profile scandal and the lack of a succession plan, Withers said. Huang had an extraordinary 60 direct reports under a flat structure favoring fast communication, and he is often described as inextricably linked to the company. Successor CEOs often struggle under normal circumstances to juggle maintaining what made a company successful while establishing their own leadership; it becomes considerably more difficult when the transition follows such a scandal.

The new CEO will have to step out of Huang's shadow, deal with the scandal and its staying power, and tackle longer-term business strategy while picking up relationships Huang managed. Huang cultivated a close relationship with U.S. President Donald Trump and accompanied him to China in May, consistently pushing for the U.S. to relax export restrictions on Nvidia's chips. He also managed close relationships with key suppliers from SK Hynix to Samsung. Storm Uru, co-head of the Global Innovation team at Nvidia investor Liontrust Asset Management, said two key priorities are changing company culture and managing the supply chain, which matters especially when supply chains are already tight.

Nvidia continues to face rising competition from rivals such as AMD and hyperscalers developing their own chips. Investors noted the new CEO will inherit a roadmap of products for the next few years unaffected by Huang's removal, and Joanne Feeney, partner and portfolio manager at Advisors Capital Management, said there are thousands of engineers beyond Jensen.

In delayed trading, Nvidia (NVDA) was down 4.34% at $166.19, while AMD rose 5.86% to $585.30, Apple (AAPL) slipped 0.21% to $354.88, Alphabet (GOOGL) gained 1.79% to $298.70 and Uber (UBER) fell 2.21% to $69.12.