Morningstar warns: AI trading and financing activities may be hampered if Huang Renxun leaves NVDA.US (NVDA.US)

The Zhitong Finance App learned that Morningstar said on Tuesday that if Nvidia (NVDA.US) CEO Huang Renxun leaves his job, it may trigger a chain reaction in the entire artificial intelligence (AI) industry and drag down AI transactions and financing activities. Brian Colello, senior equity analyst at Morningstar, wrote in a report on Monday: “We have always believed that Nvidia and Wong In-hoon are at the heart of the AI ecosystem. “His departure could lead to reduced trading activity and financing in the AI sector, increased regulation, and a stronger political backlash surrounding artificial intelligence.” He added that Nvidia's investigation into Hwang In-hoon “may result” in the CEO's departure.

The risk of this incident to the entire AI industry is that Nvidia has become the core node of the global AI industry's capital, technology, and supply chain networks. In addition to supplying chips to global AI companies, Nvidia has also participated in the upstream and downstream development of the industrial chain through investment. Its investments include companies such as OpenAI, Anthropic, XAI, CoreWeave, and Nebius. In August of this year, Nvidia also signed preliminary agreements with organizations such as Apollo Global Management, BlackRock, Brookfield, Goldman Sachs, and KKR to raise more than 500 billion US dollars in capital in the future. Hwang In-hoon said earlier that Nvidia may support up to a quarter of this funding.

This means that once Nvidia has a serious leadership crisis, the impact may not only be limited to the company itself, but may also affect many companies that rely on its chips, investments, and financial support.

Although uncertainty surrounding Hwang In-hoon's fate still exists, Morning Star maintains a fair value assessment of Nvidia of $310 per share and a four-star rating, which indicates that the agency believes that the stock is currently undervalued. Morningstar said demand for AI computing power still exceeds supply, and the survey is not expected to affect Nvidia's revenue in the short or medium term.

Colero said, “Nor can we rule out the possibility that the investigation will gradually fade out of public view and Nvidia will resume normal business operations.” However, Morningstar did include investigations and so-called espionage among the risk factors underpinning Nvidia's “extremely high” uncertainty rating.

Hwang In-hoon's going to stay the key

On November 8, Huang Renxun sent an internal letter to all employees admitting being unfaithful to his wife and apologizing to his family, employees, board of directors, partners and shareholders. There are reports that the woman involved in Hwang In-hoon's affair is an asset of a foreign intelligence agency.

Nvidia's board of directors announced on the same day that a special committee composed of independent directors has been set up to launch an independent investigation with the assistance of external independent legal advisers to find out whether Hwang In-hoon has become the target of foreign intelligence agencies' actions. The board of directors said that there is currently no reason to believe that national security interests or Nvidia's core trade secrets have been compromised, but the special investigation will still check all available information one by one.

John Rizzo, head of public policy communications at Nvidia, clearly stated that the relevant news “will not slow down the pace of Nvidia's development at all,” and that Hwang In-hoon will continue to serve as CEO and advance all established businesses without interruption. Hwang In-hoon will perform all duties as CEO normally until the final conclusion of the entire independent investigation is reached.

Meanwhile, Nvidia and Wong In-hoon faced a shareholders' class action lawsuit accusing them of allegedly defrauding shareholders. The plaintiff alleges that Wong In-hoon had an extramarital affair with a former executive of a Singaporean data center company (Megaspeed). Nvidia and Hwang In-hoon themselves did not publicly disclose this personal relationship to outside investors, thereby harming the company's reputation and future business development prospects. The plaintiff claimed that Nvidia and Wong In-hoon bear legal responsibility and compensation for this, but the specific amount of the claim has not yet been specified in the lawsuit.

Affected by the related turmoil, Hwang In-hoon's stay became the focus of the market. Nvidia is a typical example of a founder controlling a company with a small minority stake. Although Hwang In-hoon's shareholding is low (about 3.6%) and all are common shares, Nvidia's shares are highly diversified. The company has not experienced a major control crisis before, and Wong In-hoon has been CEO for over 30 years.

“Pessimists” believe that the loss of Hwang In-hoon would be “immeasurable.” Dan Gallagher, an analyst who has been tracking the chip giant for a long time, said: “It's hard to imagine someone else running Nvidia.” Analysts pointed out that Hwang In-hoon has more than 60 direct reports to his subordinates, does not use a traditional multi-level structure, and has never publicly trained successors. “Without him, no one knows how to value Nvidia.”

However, “optimists” believe that even if Hwang In-hoon leaves the company in the future, Nvidia is still likely to achieve great success in the next few years. When asked how important Hwang In-hoon is to the development of this AI chip darling over the next few years, Dan Niles, founder of Niles Investment Management and senior tech investor, said he is “not important.” Dan Niles said, “Hwang In-hoon's team is full of talents. The development of Apple in history after Jobs's death is a great example... Did it go out of business?” “Therefore, Hwang In-hoon did a great job in empowering his subordinates. I think one of the things that will happen next is appointing a successor. The Board will enforce this procedure. So I think this will eventually come to fruition.”

Yale University professor Jeffrey Sonnenfield said that the probability that Wong In-hoon will continue to be CEO is “five or five.” He pointed out that the CEO's departure was not necessarily due to public opposition to his infidelity, but rather due to concerns about trust issues and disclosure of information.

In an interview, Sonnenfield said that in the past, Hwang In-hoon had always enjoyed a high reputation in the technology industry and was widely respected and trusted, but the problems revealed by this incident were “extremely bad judgments” in his opinion. Sonnenfield believes that even if Hwang In-hoon is only left in the dark, this act itself may damage the company's internal trust. He pointed out that other Nvidia employees may face the consequences of being fired if they are involved in similar safety issues, and Hwang In-hoon should have taken on higher responsibilities as CEO.

However, Hwang In-hoon also has an advantage that other executives cannot match. Since co-founding Nvidia in 1993, Hwang In-hoon has led the company to become one of the most important AI chip suppliers in the world. His long-term accumulated performance and reputation may be an important bargaining chip for him to overcome this crisis. But if the investigation proves that he is aware of the risks involved, or that his actions hit the bottom line of the company's security and governance, this trust capital could also be quickly exhausted.

Other than whether Hwang In-hoon can stay in office, if Nvidia needs to change its CEO, who will take over is also a difficult issue. Sonnenfield pointed out that Hwang In-hoon has been deliberately maintaining a relatively flat management structure for a long time. Although this management method helps maintain decision-making efficiency, it also makes it difficult for the outside world to determine which executives within the company actually have the ability to replace him.

Furthermore, Sonnenfield anticipates that even if Wong In-hoon eventually retains the title of CEO, some day-to-day management and decision-making responsibilities may need to be handed over to other executives. He also pointed out that Hwang In-hoon does not hold super voting shares that can ensure his control. If Nvidia's board of directors ultimately deems it necessary to change the CEO, Hwang In-hoon has no institutional guarantee to block this decision through special voting rights.