Jim Cramer expressed sadness on Wednesday night regarding news reports that Nvidia's board of directors is preparing to remove CEO and co-founder Jensen Huang. The move comes in the midst of a widening scandal involving an extramarital affair. Speaking on Mad Money, Cramer noted that an Nvidia without Huang at the helm is a company many investors may be reluctant to own. He remarked that while he has long advised owners to hold their shares, this specific development was unexpected and sobering for him and others in the market.
Following the broadcast, Cramer clarified his current strategy for the stock. He stated that he does not intend to buy additional shares during the sell-off driven by the scandal. However, he also does not plan to sell his existing position ahead of the company's earnings report scheduled for next Tuesday. He maintained his belief that Nvidia can continue to succeed over the long term, even if Huang is no longer leading the company.
Nvidia shares dropped more than 8 percent in extended trading on Wednesday. This decline followed a report from The Wall Street Journal stating that the chipmaker's board was ready to oust Huang. The board had planned to meet as early as Wednesday to discuss his future role. The Journal's article was published shortly after The New York Times reported that Huang had an affair with Kimberly Powell, an executive who reports directly to him and serves as vice president of healthcare at the company.
Nvidia did not immediately respond to requests for comment on the reporting from both The Wall Street Journal and The New York Times. These latest developments add to a series of reports beginning Sunday, when The Times revealed that the board was investigating an affair between Huang and an executive at Megaspeed, a Singapore-based cloud computing firm. U.S. intelligence agencies believe the Megaspeed executive is a Chinese spy.
In response to the situation, Nvidia's board announced on Tuesday that it had engaged the law firm Wachtell, Lipton, Rosen & Katz to lead the inquiry into the matter. The firm will oversee the investigation into the allegations and the board's considerations regarding Huang's continued tenure.
The CNBC Investing Club has held a position in Nvidia since 2019. This was before the company's graphics processing units became central to the generative AI boom, which transformed Nvidia into a market juggernaut and elevated Huang to rock star status. Due to the uncertainty surrounding Huang's future, the Club downgraded its rating on Nvidia to a hold-equivalent 2 on Tuesday.
Earlier on Wednesday, Cramer indicated a desire to initiate a position in rival Advanced Micro Devices. He believes AMD may gain business as a result of the Huang scandal. However, specific trading restrictions prevented immediate action. These rules prohibit trading any stock mentioned on CNBC for a 72-hour period. Cramer added AMD to his Bullpen watchlist, signaling an intention to buy once the restrictions expire. He also plans to exit his position in Intel while building up his holdings in AMD.
Despite his preference for AMD at this moment, Cramer drew a parallel to Apple to justify his continued confidence in Nvidia. He cited the company's success following the death of co-founder Steve Jobs. Tim Cook led Apple to greater heights during his 15-year tenure before passing the role to John Ternus on September 1. Cramer believes similar talent exists within Nvidia to fill any leadership vacuum.
Cramer specifically highlighted Ian Buck, a vice president who created the CUDA software program. This software was integral to Nvidia's evolution from a video game chip company into a data center and AI leader. While the Charitable Trust remains long on Nvidia, Cramer's comments reflect a cautious but optimistic stance on the company's future independent of its co-founder.
