A leadership crisis at Nvidia Corp. curbed the appetite for riskier corners of the market, driving stocks lower as traders questioned the outlook for the artificial-intelligence trade.
The company at the heart of the AI boom tumbled 13% after Chief Executive Officer Jensen Huang was ousted from his post. The Nasdaq 100 fell 1.4%. A closely watched gauge of chipmakers slumped 3.5%.
Huang, the preeminent face of the AI infrastructure boom, was ousted from his post after reports of two affairs, including with one woman who is suspected of spying for China. Chief Financial Officer Colette Kress was named interim CEO.
“There is potential that this will lower AI infrastructure spend in the long-term given that Nvidia will likely lose market share,” said Ryuta Makino at Gabelli Funds. “This can also mean that lower efficiency gains on these servers equals lower AI efficiency and therefore the entire ecosystem will be worse overall.”
While Makino is still assessing the impacts of the latest developments, he says there will definitely be a “ripple effect” to the AI supply chain given a lot of this was propped up by Jensen himself.