Nvidia After Huang: What 187 Forced CEO Exits Predict for the Stock

Nvidia closed Friday at $162.85, 13% below its Nov. 6 close and 32% below its record close of $239.24 on Oct. 6. Jensen Huang resigned as chief executive on Thursday morning, Nov. 12, a departure that took effect immediately and covered his posts as president, chief executive and director.

The board named Colette Kress, chief financial officer since 2013, interim CEO. She keeps the CFO job while directors search inside and outside the company for a permanent successor. Harvey C. Jones, a former Synopsys chief executive, took the board chair, the first Nvidia has had. The company named no permanent successor and gave no date for one.

The timing follows an admission Huang made on Nov. 6 that he had an affair with a woman U.S. officials suspect of spying for China. The Nov. 6 close was the last before that admission. The Wall Street Journal reported on Wednesday, Nov. 11, that the board was preparing to oust him, and he left the company and the board the next morning with no other job waiting.

What does a study of 187 forced exits actually show?

Paul Farah of Notre Dame University-Louaize and Hui Li of La Trobe University published the study in 2021 in the International Journal of Financial Studies. They reviewed 735 chief executive changes at S&P 1500 companies (the large-cap equity index used for governance research) from 2003 to 2012 and classified 187 as forced: the CEO was ousted, resigned under pressure, or left young and fast with no comparable job waiting.

They then split the forced exits by how the stock had performed in the three years before the change:

• 125 companies trailed the market. Firing that CEO produced a 1.0% gain over five days around the announcement, and the median company beat the market by 18 points over the following three years.
• 53 companies beat the market. Firing that CEO cost 3.4% over five days, and the median company trailed the market by 13 points over the following three years.

Nvidia sits in the second group by a wide margin. From Nov. 13, 2023 to Wednesday's close, Nvidia rose 258% while the S&P 500 rose 79%.

Two details line up with the sample. Forty-nine percent of the forced exits in the study left no permanent successor behind, which the authors read as a sign of how unplanned these departures tend to be. And when a board gave no clear reason for an exit, the stock fell 3.2% over five days, whereas a known reason produced a 1.5% gain. Nvidia has explained itself, and the market has paid accordingly.

What does not line up with the sample?

The average fired chief executive in the study was 54 years old and had held the job for six years. Huang is 63 and ran Nvidia for 33 years from its founding, a founder-executive rather than a hired manager, and the study does not separate the two. Kress said the company inherits "the extraordinary foundation Jensen created over the last 33 years."

The sample also contains no company of Nvidia's size, covers 2003 to 2012, and reports medians, which describe a tendency rather than a forecast. Half the companies did better and half did worse, and the spread was wide.

A second line of evidence points the same way on timing. PwC's Strategy& examined CEO changes at the world's 2,500 largest public companies between 2011 and 2013 and found that forced exits cost shareholders mostly before the announcement, with a median 13% of total shareholder return (price plus dividends) in the year before the change and 0.6% in the year after. Nvidia matches the first half. Over the past 12 months it is down 13% while the S&P 500 is up 13%.

How a retiree's position changes

The study turns concrete in the case of a retired couple, 68 and 65, holding 8,000 Nvidia shares in a taxable brokerage account. He bought 200 shares in January 2016 at $32.37, $6,474 in total, because he had used the chips at work. Two splits later, four-for-one in 2021 and ten-for-one in 2024, the position is 8,000 shares. The remaining $1.2 million of their money sits in index funds inside an individual retirement account (IRA).

Date	Nvidia price	8,000 shares
Oct. 6, record close	$239.24	$1,913,920
Nov. 6, before the admission	$186.64	$1,493,120
Nov. 11, before the resignation	$173.73	$1,389,840
Nov. 12, close	$166.19	$1,329,520
Nov. 13, close	$162.85	$1,302,800

The stake is worth about $1.3 million, 201 times what he paid, and 52% of everything the couple owns outside the house. It is down $611,120 from the October peak and $190,320 since Nov. 6, a week in which the S&P 500 rose 2.6%. The resignation day alone cost $60,320. The study's 3.4% five-day reaction would have cost $44,295 on this stake, and Nvidia has lost roughly four times that since the admission, because the decline arrived in stages across a week of reports before the board acted.

What does the three-year lag cost in dollars?

Thirteen points behind the market on $1,302,800 is $169,364 less than the same money would earn in an index fund by late 2029. The industry-adjusted version, 15 points, is $195,420. Had Nvidia behaved like the companies that fired an underperformer, 18 points ahead, the gap would run $234,504 the other way, and nothing in the company's record places it in that group.

What does the tax bill force?

Selling all 8,000 shares at $162.85 realizes a $1,296,326 gain. Stacked on $54,000 of Social Security and $48,000 of IRA withdrawals, and after the 2026 standard deduction, the first $40,500 of gain falls in the 0% capital gains bracket, the next $514,800 is taxed at 15%, and the remaining $741,026 at 20%. The 3.8% net investment income tax (a surtax on investment income for high earners) applies to most of it. The federal bill runs about $268,754, and the sale also sets Medicare premiums two years from now off this year's income. They would keep about $1,034,046.

Trimming in stages costs less:

• A quarter, 2,000 shares, realizes $324,082, costs $48,921, roughly 15% of the gain, and leaves $276,779 to move into index funds.
• A tenth, 800 shares, realizes $129,633 and costs $13,370, with no net investment income tax because income stays under $250,000.
• A tenth a year for several years is the path most planners draw for a position this size.

The alternative is time. Shares held until death pass to heirs at that day's market value, and the whole gain goes untaxed, which is why a 68-year-old with a $6,474 basis is usually told to trim rather than sell.

What to watch

Nvidia reports fiscal third-quarter results on Tuesday, Nov. 17, after the close, with Kress presenting as both chief executive and chief financial officer. The permanent CEO appointment is the other date. The authors' explanation for the 13-point lag is that boards which pushed out a winning chief executive brought in someone who could not sustain the run; whether Nvidia's board finds that exception is the entire bet for a holder who stays.

The study is small, old, and silent on founders. The concentration is not small.