Nvidia faces governance scrutiny amid CEO investigation

Following Huang’s admission on Sunday of infidelity to his wife, Nvidia’s board announced an investigation into reports that he was targeted by a foreign intelligence operation. The New York Times reported that U.S. authorities concluded a woman with whom Huang had a relationship was a Chinese intelligence asset. The board maintains that there’s “no reason to believe that either national security or NVIDIA secrets were compromised,” but the inquiry will examine all available information.

Experts suggest the investigation, potentially leading to the consideration of Huang’s ousting, presents a unique challenge given his immense influence within the company. “He’s bound up in the company’s identity much more than other cases,” noted Brian Burke, founder of Burke Law & Strategy. He described Nvidia’s situation as a “cult” that other CEOs aspire to emulate.

Huang, 63, has cultivated a concentrated decision-making structure, boasting 60 direct reports and operating without a chief operating officer. His central role in strategic and technical decisions has been amplified by the AI boom since 2022, transforming him into a tech industry celebrity. He holds a 3.56% stake in Nvidia, the world’s second most valuable company, which saw its shares drop over 4% on Monday. Nvidia is estimated to control roughly 90% of the market for high-powered GPU computer chips used in AI data centers.

The company has also lacked a chief compliance officer, prompting questions from Securities and Exchange Commission staff in 2022 regarding board risk oversight. Nvidia maintains a compliance committee comprised of the chief financial officer, executive vice president of operations, and senior vice president of human resources.

Similar situations are rare. McDonald’s fired CEO Steve Easterbrook in 2019 over a consensual relationship with an employee, later recovering $105 million in compensation after uncovering additional undisclosed relationships. Nvidia’s case is complicated by the alleged involvement of a foreign intelligence asset and the CEO of a key U.S. technology company.

Jason Schloetzer, a professor at Georgetown University, believes Nvidia’s reliance on Huang has left the company vulnerable. He stated, “The board has made a mistake by not having a clearly outlined succession plan.”

Potential interim CEO options include Nvidia’s lead independent director, Stephen Neal, or Chief Financial Officer Colette Kress. Huang’s children, Spencer and Madison, who both work at Nvidia, and his son-in-law, Nico Caprez, are also potential successors. Huang could also remain with the company in a different role.

In past interviews, Huang has downplayed traditional succession planning, emphasizing knowledge transfer to colleagues, and has expressed a desire for the next CEO to be an existing employee. This story originally appeared on Fortune.com