Nvidia Drops Nearly 15% on Jensen Huang's Exit — and Recovers

Nvidia shares fell almost 15 percent on the news of Jensen Huang's departure, then clawed back most of the loss during the trading session. Markets in Frankfurt also breathed a sigh of relief. ARD markets expert Markus Gürner said: "I genuinely haven't met anyone who's talking about a crash or expecting one."

Huang founded Nvidia 33 years ago and ran it as CEO throughout. Financial market analyst Kevin Kelly told Yahoo Finance: "Huang leaving should really have shaken the market harder, but apparently many had expected it." By the close, the stock had moved back up — losses were nearly balanced out.

What does the leadership change mean?

Kelly's read on the moat: "Nvidia's lead lies above all in its AI programming ecosystem. Chips are, to a certain degree, interchangeable. Investors are now asking whether Nvidia's business model holds and who can lead the company as farsightedly as Huang in the future."

Huang built his reputation on hardware expertise and repeated pivots — first gaming, then cryptocurrency, now artificial intelligence. Most recently he liked to talk about data centers in space, free of residents' protests. But there was criticism too, as Kelly noted: "At the same time there was criticism of the circular financing and Nvidia's investments. The question is: does that continue, and what happens to all the partnerships and financial commitments?"

For now, Nvidia has calmed investors. Collette Kress, a long-time close colleague of Huang, takes the CEO post on an interim basis.

CNBC floor reporter Jim Cramer called it a good choice, with caveats: "Of course there are questions about what she knew about Kimberly Powell and Alice Huang, about all of that. But she can run the company and explain where it stands financially, because that will become an issue too. I trust her."

How does Nvidia's self-reinforcing system work?

Nvidia counts as one of the biggest — arguably the biggest — winners of the AI boom. But it partly stokes demand itself, and the loop runs roughly like this:

• Nvidia invests in an AI cloud provider, which uses the money to buy Nvidia chips.
• Nvidia, in turn, buys compute capacity from that provider for its own services.
• The cloud provider becomes more creditworthy for banks and other investors, borrowing to build more data centers.
• Nvidia then supplies chips for those data centers too.

That self-reinforcing system has already hit limits, says Bloomberg finance expert Romain Bostick. "The share price exploded, so many institutional investors reached their cap on how large a single stock's share of the total portfolio may be. They had to scale back their holdings." A fund cannot let one company's stock dominate it entirely.

What happens to rivals and start-ups?

If Nvidia stops investing as before, the domino effects could be significant. Start-ups could lose funding, data centers could get more expensive, and AI company valuations could correct downward. Anthropic's IPO next week, for instance, is already set to raise considerably less money than hoped just a month ago.

Some observers see an opening for competitors like AMD and Qualcomm, whose chips could fill emerging gaps. Their shares did gain ground. So far, though, there's no sign Nvidia will scale back production after Huang's exit.

One Bloomberg financial expert, Orthos, says there's only one way to avoid the risks: "By giving up potentially massive gains until the bubble actually bursts."

For now, the market's verdict is measured: a near-15 percent intraday drop, mostly recovered, an interim CEO trusted by commentators, and a wait-and-see stance on whether Nvidia's financing machine keeps running without its founder.