Nvidia board considers removing CEO Jensen Huang, Financial Times reports

Nvidia's board met late Wednesday to consider removing Chief Executive Jensen Huang after reports of two extramarital affairs, the Financial Times reported, as shares fell ahead of Thursday's open.

This is a developing story and will be updated.

The shares were down 6.6% in premarket trading at 6 a.m. ET Thursday. Nvidia represents about 6% or 7% of the S&P 500, according to Jon Foley, head of the FT's Lex column.

Bernstein halved its target price for Nvidia shares on Thursday, cutting it from $400 to $200.

"Jensen is Nvidia, right? He is the visionary. The reason they're in the position that they're in today is because he made decisions 10 years ago," Bernstein senior analyst Stacy Rasgon told CNBC. Rasgon said the alleged affair with a direct report made it "much tougher for the board to leave him in position."

Huang, 63, has led Nvidia since he co-founded it in 1993, and there is no obvious successor.

Board shifts after second report

The board's meeting Wednesday contrasted with its expression of confidence in Huang and his leadership team on Sunday. The Guardian said The Wall Street Journal first reported that Nvidia was preparing to oust Huang.

Huang told employees in a Sunday memo that he had been unfaithful to his wife and took full responsibility, though he offered no details about the relationship.

Huang was romantically involved with Alice Huang, an executive at cloud company Megaspeed, the Financial Times reported, according to CNBC. U.S. intelligence officials believe Alice Huang is a spy for China and have said she helped facilitate Nvidia chip shipments to Chinese firms.

The board hired New York law firm Wachtell, Lipton, Rosen & Katz to investigate the relationship, with partner Joon Kim leading the inquiry. Independent directors on a board committee will oversee the investigation with help from Kim and the firm.

Daniela Hathorn, senior market analyst at capital.com, said the board previously stated it had no reason to believe company secrets were compromised.

The New York Times reported Wednesday that Huang had a separate extramarital relationship with Kimberly Powell, an Nvidia healthcare executive who reports to him, according to CNBC and The Guardian. The Guardian said video captured Powell being affectionate with Huang at a hotel during a company conference in March.

Nvidia had reached no decision on Huang's future when the FT recorded its Thursday morning podcast, the newspaper said. It was not immediately clear who would lead Nvidia if Huang is removed, what the investigation has found or whether Huang or Powell has responded to the Times report.

Investors weigh an ouster

Several Wall Street analysts told CNBC that removing Huang could send Nvidia shares down 20%. Richard Reyle, chief investment officer at Questar Capital Partners, told CNBC that if the board must move on from Huang, "that's just going to make the stock uninvestable."

Chris Beauchamp, chief market analyst at IG, said in comments carried by The Guardian that "after two, one of which involving a direct report, his fate is sealed."

U.S. lawmakers have called for Huang's resignation, CNBC reported.

The Guardian put Nvidia's market-value loss this week at about $600 billion since the board announced its investigation, including Wednesday's after-hours selloff.

Nvidia's bylaws allow a majority of directors to remove Huang with or without cause. The company considers all but Huang independent among its 11 directors, and he owns about 3.6% of its stock.

BBC News cited Chief Financial Officer Colette Kress and co-founder Chris Malachowsky as possible successors, along with outsiders including senior figures at Apple and Arm.

Nvidia is scheduled to report earnings on Nov. 17.