Yesterday, I wrote about how Jensen Huang’s scandal cost him roughly $10 billion and the rest of us roughly $300 billion. Then the news broke that he’d reportedly been sleeping with a direct subordinate. Augusta and I sat down to record a follow-up conversation, and the push notification came: Huang had resigned as CEO. There’s a new interim CEO—Colette Kress, Nvidia’s CFO.
When we taped this morning, Nvidia’s stock was down roughly 18% since the news broke. The destruction of wealth — around $800 billion! — was about the size of Obama’s stimulus during the financial crisis. That was at a desperate moment in our nation’s history, and getting it passed took a huge fight in the House and Senate. Now the same amount of household wealth has disappeared as the result of some very bad private choices.
You can catch up on that here:
Now it’s time for The Professor Is In, where I sit down with my producer Augusta Chapman to take audience questions. Think of it like office hours—my door’s open, come on in.
The risk isn’t just Huang
Augusta started with the obvious question. If Huang was the risk to the company, why sell now that he’s out? The chips are the same. The business is still there. The strategy is the same.
One answer: Maybe Huang really was that extraordinary a CEO. It’s possible that he would have created $800 billion worth of value for Nvidia, and now that he’s out, that won’t happen.
A second possibility: His actions have put Nvidia in the public eye in a new way. That, in turn, has opened up a lot of regulatory attention. Our current president has run our entire nation’s AI policy as though the only important thing is that the U.S. beats China. It’s like a space race 2.0. Except the president has also said Nvidia can sell chips to China — so it’s like NASA built our competition a new rocket ship, just so they don’t fall behind.
More regulatory pressure on Nvidia — which is selling strategically important chips — could easily add up to tens or hundreds of billions of dollars.
On the other hand, it’s the scandal that creates this regulatory pressure. This doesn’t explain the large price drop that occurred around the CEO’s resignation. Perhaps markets believe — with some justification — that Jensen Huang has political capital with the President, and that political capital is worth hundreds of billions. The idea that whether the President likes you or not is worth hundreds of billions is both plausible, and terrifying.
And a third: The board pushed him to resign because they know something we don’t. I joked to Augusta that maybe we’d get some Russian spies in the story too. And indeed, since we taped there have been reports of a third affair, this one with a different Nvidia employee. Who knows what might come next.
This isn’t just a paper loss
Some readers of my first piece pushed back on the loss of value. The argument went that this is just a paper loss, and the money didn’t actually disappear. It just moved into AMD and other chip stocks. There’s some truth to that, in a narrow sense, but it misses the key issue.
Say you have an Nvidia stock certificate in a drawer right now. That specific certificate is now worth 18% less. Owning the actual certificate isn’t the point — what you own is a share of the company. That means that you get to help control Nvidia, and you get a share of its future profitability.
Now people are willing to pay a lot less for a claim to that future profit. If markets are even moderately sensible, then this move tells us that moderately sensible traders now expect Nvidia’s future profits to be much much lower. They’re not telling us why, but if it’s lost innovation, lost sales, or lost leadership, then something very real was destroyed.
Of course, the price could bounce back. Today Nvidia went from down 20% to down 11% (in a single day). It could keep rising, or fall further. Stock prices are inherently unpredictable, so the best estimate of future losses is current losses: about 11% as of Thursday’s close.
There’s a reason people buy insurance
The fact that Jensen Huang had no succession plan in place was well known. So Augusta wanted to know if investors had already priced that in. My answer is, partly.
Think about hurricane insurance. If you’re a company without it, and there’s a minor risk of a hurricane, you might be worth a little less than you’d be if you were fully prepared. But then the hurricane comes. If you’re not covered, you’re really in trouble.
What’s hurricane insurance here? Succession risk. The idea that a 63-year-old CEO might not be there tomorrow is something you learn in the first two weeks of an MBA program. Or the first two weeks of medical school.
Nvidia was worth a bit less before this because it hadn’t done good succession planning, and some people were smart enough to realize this might happen. People took bets on this months ago when they learned that spies from Beijing were in the mix. But the company continued to go uninsured, and now the hurricane is here. As part of Huang’s exit, Nvidia named the first chair of the board in its history.
It appears that the world’s second largest company was incredibly poorly structured around its CEO. Once you understand that, you might start to think, what other skeletons are in the closet? Is there a more fundamental problem of poor governance, weak planning, and absent leadership?
The more I think about this, the more angry I am. Anyone with a pension, a mutual fund, or a 401(k) owns Nvidia. When you’ve won the world’s lottery and you’re managing the rest of our retirement money, you owe us some basic seriousness. I realize that doesn’t sound very “economist” of me, but sometimes I’m a human, too. And as a human, I know that Uncle Ben was right: With great power comes great responsibility.
The rules of the game are what keep people from indulging in their worst impulses. Set up sensible rules, and you get pretty good outcomes. Set up crappy ones, and you lose half a trillion dollars.
Other questions Augusta brought me:
Why have other CEOs survived affairs that never dented their company’s stock?
Is genre fiction the best preparation for the news of 2026?
Which country’s spy would I most like to see turn up in this scandal next? (Answer: A Canadian, recruited personally by Mark Carney.)
Finally, should we break these companies up?
One of the most-liked comments on my video about this was that these companies should all be broken up. There are three issues to separate here.
First: usually, people think a monopoly is bad because of pricing power. Nvidia has roughly 90% of its market, and as a dominant firm can raise prices on everyone. People who play video games know this well (my 14-year-old tells me the term of art is “RAMageddon”).
Second: Economies of scale. Split one big, efficient firm into two smaller ones, and you might lose something important.
Third: Politics. Concentrated wealth buys concentrated influence, as we’ve written about before. Elon Musk put $474 million into trying to sway the midterms, and even though he failed, I think it’s a safe bet there’s more (money) where that came from. Also, he succeeded in his prior attempt at getting his guy in the White House, and buying himself a central role in that administration.
A bit of background about antitrust is useful here. It isn’t illegal to be a monopoly. What’s illegal is monopolizing. Think of the Olympics: we don’t ban gold medals, we ban steroids. If Nvidia knocked out all its competitors unfairly, that would be a violation. But if it built the chip every AI developer wants? That’s a gold medal.
That gives us reliable rules of the game. But what if the people winning those medals aren’t acting in our best interests? At that point, does it matter that they got there fairly?
Watch the full episode for the rest.