NVidia stock is down 7.30% this morning or about 300 billion dollars in market cap. If you ever questioned if a CEO can be valuable, there's your proof.
If you ever questioned if a CEO can be valuable, there's your proof.
This market reaction is not necessarily a proof of that - among many other factors, markets also value stability and predictability. Sudden unexpected departure of a high profile CEO creates uncertainty - which makes the stock more risky in the eyes of the market, leading to a price drop (which can be seen as market demanding a higher risk premium.) On top of that, when the market is overheated in a specific sector, and there is a sense of a bubble forming or having formed already, many investors are extra skittish, and hope to be the first one out the door at first sign of deeper trouble and a possible impending bubble pop. This nervousness just amplifies these kind of price reactions to sudden unexpected events. It can fully turn out to be noise over longer term though, once a new CEO is found and takes charge, and things stabilize again. It's also possible the bubble was going to pop whether Huang was at the helm or not, and his departure would have had no impact on the eventual price of NVIDIA stock, it might have just hastened the inevitable..
CEOs of course are valuable in market terms - they are the top executive running a company on behalf of shareholders. How valuable a specific CEO is relative to other CEOs is a different question though, and a much harder one to answer. But it's not as simple as CEO X leaves, price drops $Y, therefore CEO X was worth $Y value to the company...
Edit: as an aside thought, it's not fully symmetrical - if a stock price of a company shoots up upon unexpected CEO departure, I would feel much more comfortable making firmer conclusions about the market's opinion on the value (or lack of as it may be) of that specific CEO to that specific company :)
This market reaction is not necessarily a proof of that - among many other factors, markets also value stability and predictability.
Totally agree. I will add onto that and say that even if Jensen Huang had stayed CEO, his affairs and subsequent actions had already created uncertainty (legal troubles? can the board still trust him? etc). We can't know for sure, but it's possible the stock price would still have dropped in a world where he stayed on.
if a stock price of a company shoots up upon unexpected CEO departure
Hey look, something we can test! Cool!
Because I'm from the PNW, I'll use Starbucks for an example: when Brian Niccol was announced as the new CEO on August 13, 2024, the stock price went up from $77 to almost $96.
Was he actually worth a 25% bump in value? I don't know. But at least sometimes the market prices in the value of a CEO.
even if Jensen Huang had stayed CEO, his affairs and subsequent actions had already created uncertainty (legal troubles? can the board still trust him? etc).
Yeah, sounds like he was setting the company up for sexual harassment problems. I'm sure they are all set up with arbitration and NDAs, but that's hardly a guarantee of secrecy, as Meta has discovered.
That is probably a better example of market directly putting value on a CEO ! Looking at the results so far (which might be too soon to make a fair judgment), the +25% bump was probably overvalued a bit, but partially justified. If you held the stock before the new CEO announcement, and kept holding until today, then you would have done better than the overall market, better than the entire consumer cyclical sector, and better than its biggest direct competitors (at least ones publicly traded) - but if you bought SBUX after the announcement at the +25% premium, you would have underperformed the overall market and the sector - but still beat at least some competitors.
I would say, not a terrible showing by the market there, at least so far.
Chipotle, where Niccol was CEO at the time, dropped over 7% on the day he announced moving to SBUX. This might seem like confirmation that the market valued him this much as well (adding value to SBUX and removing value from CMG) - but it's probably more complicated on this end. CMG had a strong stock run in the years Niccol was CEO, but peaked and started a slide/significant correction already months before the announcement. Niccol leaving might have simply been a confirmation that things are not as rosy at CMG. And even though CMG stock made a brief comeback after Niccol's departure, it was short lived and the company has underperformed significantly since.
Yep. A bad CEO can invalidate the work of 100,000 intelligent engineers. Just look at Intel. Having good leadership is incredibly important. It is absolutely worth it to pay top dollar for someone with experience.
I'd posit a good CEO knows who to put in what leadership position more than what they do themselves.
Sure, but that only makes them more important. If you’re the board of a major company, trying to skimp on CEO pay is just an obvious example of penny-wise pound-fool. Even the most expensive CEOs are a fraction of a fraction of a fraction of the net profit of something like nvidia.
Find your guy, then pay him whatever he wants. From the perspective of the board, what’s the point of pinching pennies?
It's really too early to say how much of an effect a different CEO will have on the company. The market is probably reacting to the inherent (mild) uncertainty of the situation more than anything else
CEOs are valuable when they are creating new companies, beyond that it's pretty much just people speculating. I could have told them that data centers are more profitable than gaming hardware, I just would have added that they can go fuck themselves.
Of a corporation large enough to have serious operational inertia? Do performative things that make the stock look valuable until the next thing that happens that makes the stock look less valuable, and then take their golden parachute to be replaced with the next sacrificial lamb.
Colette Kress, current Executive Vice President and Chief Financial Officer of NVIDIA, has agreed to serve as Interim Chief Executive Officer. Kress will continue to serve as Executive Vice President and Chief Financial Officer while serving as Interim Chief Executive Officer until a permanent successor has been named. The Board is initiating a search for a permanent Chief Executive Officer and will consider internal and external candidates.
From what I've read online, Huang preferred to keep upper management minimal so he can be involved in all aspects of the company.
This seems like an immense power vacuum and I don't think the company can fill it easily while retaining its current shape. This will be interesting to watch, but I fear for the consumer gaming division.
Ehhhh the consumer gaming division has already been torn apart for data center usage. This feels like it might actually be beneficial since it creates cracks in Nvidia's monopoly quite a bit and a new ceo might not entirely agree with the, almost exclusive, ai pivot the company has taken since they won't necessarily have access to the same... privileges, that Huang had been receiving to push so hard in that direction.
Ideally, we see damage to Nvidia's reputation to the point that a real competitor can capitalize and shake up the industry dynamic.
If this is the thing that tanks the global economy and pops the AI bubble... I'd be miserable, same as any major crash, but it's quite the happenstance.
Said this on the other thread, but mark my words, he'll be back within the next year or two once everyone has forgotten about this whole thing and has time to 'reflect'.
Overall, he is too important and vital, and a notably damn successful and (even now!) respected engineer and CEO, to just let go from one of the biggest companies in the world.
NVIDIA has clearly been good at it's core trade in the past couple of decades. Dominance in GPUs (consumer & data center) and the foresight to build CUDA is impressive. I have to think Jensen has a significant role to play in that.
So, from that angle, finding a successor to continue that will be interesting.
As a consumer, I do hope that, despite gaming now being a relatively small business ($11bn revenue, but 7% of total revenue from the brief numbers I've seen) for NVIDIA, they will continue in this space. It would be very easy for a bean counter to try and "focus" the business here. While my preference would be that a competitor simply "gets good"... we've yet to see it. And in an era where manufacturing is extremely constrained (it was only a couple of days ago that it was rumoured that NVIDIA were pushing TSMC to manufacture RAM to alleviate this), would any of the existing entrants, or even newcomers, be interesting in the gaming business?
I don't believe LLMs, or the demand for them, is going away - so to that end, whatever financial outcomes happen, I do not find it realistic that suddenly gaming would re-overtake data center demand. Either they have to find it an interesting business to compete it, or they still think the revenue from it is worth it.
D_E_Solomon | 8 hours ago
NVidia stock is down 7.30% this morning or about 300 billion dollars in market cap. If you ever questioned if a CEO can be valuable, there's your proof.
ylph | 7 hours ago
This market reaction is not necessarily a proof of that - among many other factors, markets also value stability and predictability. Sudden unexpected departure of a high profile CEO creates uncertainty - which makes the stock more risky in the eyes of the market, leading to a price drop (which can be seen as market demanding a higher risk premium.) On top of that, when the market is overheated in a specific sector, and there is a sense of a bubble forming or having formed already, many investors are extra skittish, and hope to be the first one out the door at first sign of deeper trouble and a possible impending bubble pop. This nervousness just amplifies these kind of price reactions to sudden unexpected events. It can fully turn out to be noise over longer term though, once a new CEO is found and takes charge, and things stabilize again. It's also possible the bubble was going to pop whether Huang was at the helm or not, and his departure would have had no impact on the eventual price of NVIDIA stock, it might have just hastened the inevitable..
CEOs of course are valuable in market terms - they are the top executive running a company on behalf of shareholders. How valuable a specific CEO is relative to other CEOs is a different question though, and a much harder one to answer. But it's not as simple as CEO X leaves, price drops $Y, therefore CEO X was worth $Y value to the company...
Edit: as an aside thought, it's not fully symmetrical - if a stock price of a company shoots up upon unexpected CEO departure, I would feel much more comfortable making firmer conclusions about the market's opinion on the value (or lack of as it may be) of that specific CEO to that specific company :)
bitshift | 3 hours ago
Totally agree. I will add onto that and say that even if Jensen Huang had stayed CEO, his affairs and subsequent actions had already created uncertainty (legal troubles? can the board still trust him? etc). We can't know for sure, but it's possible the stock price would still have dropped in a world where he stayed on.
Hey look, something we can test! Cool!
Because I'm from the PNW, I'll use Starbucks for an example: when Brian Niccol was announced as the new CEO on August 13, 2024, the stock price went up from $77 to almost $96.
Was he actually worth a 25% bump in value? I don't know. But at least sometimes the market prices in the value of a CEO.
tanglisha | 2 hours ago
Yeah, sounds like he was setting the company up for sexual harassment problems. I'm sure they are all set up with arbitration and NDAs, but that's hardly a guarantee of secrecy, as Meta has discovered.
ylph | 2 hours ago
That is probably a better example of market directly putting value on a CEO ! Looking at the results so far (which might be too soon to make a fair judgment), the +25% bump was probably overvalued a bit, but partially justified. If you held the stock before the new CEO announcement, and kept holding until today, then you would have done better than the overall market, better than the entire consumer cyclical sector, and better than its biggest direct competitors (at least ones publicly traded) - but if you bought SBUX after the announcement at the +25% premium, you would have underperformed the overall market and the sector - but still beat at least some competitors.
I would say, not a terrible showing by the market there, at least so far.
Chipotle, where Niccol was CEO at the time, dropped over 7% on the day he announced moving to SBUX. This might seem like confirmation that the market valued him this much as well (adding value to SBUX and removing value from CMG) - but it's probably more complicated on this end. CMG had a strong stock run in the years Niccol was CEO, but peaked and started a slide/significant correction already months before the announcement. Niccol leaving might have simply been a confirmation that things are not as rosy at CMG. And even though CMG stock made a brief comeback after Niccol's departure, it was short lived and the company has underperformed significantly since.
stu2b50 | 8 hours ago
Yep. A bad CEO can invalidate the work of 100,000 intelligent engineers. Just look at Intel. Having good leadership is incredibly important. It is absolutely worth it to pay top dollar for someone with experience.
CptBluebear | 6 hours ago
To a point. Their salaries have ballooned to ridiculous levels at this point. Their contributions are disproportionately rewarded.
I'd posit a good CEO knows who to put in what leadership position more than what they do themselves.
I absolutely agree that bad leadership can tank a company though.
stu2b50 | 6 hours ago
Sure, but that only makes them more important. If you’re the board of a major company, trying to skimp on CEO pay is just an obvious example of penny-wise pound-fool. Even the most expensive CEOs are a fraction of a fraction of a fraction of the net profit of something like nvidia.
Find your guy, then pay him whatever he wants. From the perspective of the board, what’s the point of pinching pennies?
thearctic | 7 hours ago
It's really too early to say how much of an effect a different CEO will have on the company. The market is probably reacting to the inherent (mild) uncertainty of the situation more than anything else
datavoid | 8 hours ago
CEOs are valuable when they are creating new companies, beyond that it's pretty much just people speculating. I could have told them that data centers are more profitable than gaming hardware, I just would have added that they can go fuck themselves.
Adys | 7 hours ago
I’m wondering what you think a CEO actually does.
MimicSquid | 6 hours ago
Of a corporation large enough to have serious operational inertia? Do performative things that make the stock look valuable until the next thing that happens that makes the stock look less valuable, and then take their golden parachute to be replaced with the next sacrificial lamb.
datavoid | 3 hours ago
Cheat on their wives, ignore their kids, and seek more money at all costs?
Day to day it's mostly just long hours of phone calls and meetings though.
Fiachra | 7 hours ago
What a whirlwind couple of years he's had; I look forward to the movie they'll make about it in under five years.
Wafik | 6 hours ago
A Skydance production on Paramount+. He thought he could bribe Presidents, but he dicked around with Chinese spies...
[OP] shiruken | 9 hours ago
Colette Kress, current Executive Vice President and Chief Financial Officer of NVIDIA, has agreed to serve as Interim Chief Executive Officer. Kress will continue to serve as Executive Vice President and Chief Financial Officer while serving as Interim Chief Executive Officer until a permanent successor has been named. The Board is initiating a search for a permanent Chief Executive Officer and will consider internal and external candidates.
arqalite | 8 hours ago
From what I've read online, Huang preferred to keep upper management minimal so he can be involved in all aspects of the company.
This seems like an immense power vacuum and I don't think the company can fill it easily while retaining its current shape. This will be interesting to watch, but I fear for the consumer gaming division.
countchocula | 5 hours ago
Ehhhh the consumer gaming division has already been torn apart for data center usage. This feels like it might actually be beneficial since it creates cracks in Nvidia's monopoly quite a bit and a new ceo might not entirely agree with the, almost exclusive, ai pivot the company has taken since they won't necessarily have access to the same... privileges, that Huang had been receiving to push so hard in that direction.
Ideally, we see damage to Nvidia's reputation to the point that a real competitor can capitalize and shake up the industry dynamic.
moocow1452 | 6 hours ago
If this is the thing that tanks the global economy and pops the AI bubble... I'd be miserable, same as any major crash, but it's quite the happenstance.
macleod | 5 hours ago
Said this on the other thread, but mark my words, he'll be back within the next year or two once everyone has forgotten about this whole thing and has time to 'reflect'.
Overall, he is too important and vital, and a notably damn successful and (even now!) respected engineer and CEO, to just let go from one of the biggest companies in the world.
babypuncher | 3 hours ago
He belongs in prison
DefiantEmbassy | 5 hours ago
NVIDIA has clearly been good at it's core trade in the past couple of decades. Dominance in GPUs (consumer & data center) and the foresight to build CUDA is impressive. I have to think Jensen has a significant role to play in that.
So, from that angle, finding a successor to continue that will be interesting.
As a consumer, I do hope that, despite gaming now being a relatively small business ($11bn revenue, but 7% of total revenue from the brief numbers I've seen) for NVIDIA, they will continue in this space. It would be very easy for a bean counter to try and "focus" the business here. While my preference would be that a competitor simply "gets good"... we've yet to see it. And in an era where manufacturing is extremely constrained (it was only a couple of days ago that it was rumoured that NVIDIA were pushing TSMC to manufacture RAM to alleviate this), would any of the existing entrants, or even newcomers, be interesting in the gaming business?
I don't believe LLMs, or the demand for them, is going away - so to that end, whatever financial outcomes happen, I do not find it realistic that suddenly gaming would re-overtake data center demand. Either they have to find it an interesting business to compete it, or they still think the revenue from it is worth it.