What’s Next for Nvidia After Jensen Huang’s Resignation?

Nvidia (NASDAQ:NVDA) has been the trendsetter for artificial intelligence (AI) since the start of the AI boom. Companies and investors have turned to the company and its founder, Jensen Huang, for clues about the market and what to expect next. This is because the tech giant, as the clear leader in AI chips, had its finger on the pulse of AI, with an understanding of the technology, the needs of the market, and the keys to unlock the next waves of growth.

A great deal of turmoil has upset this story in recent days, however, and Huang, following affair allegations, stepped down on Thursday. The board appointed chief financial officer Colette Kress as interim CEO and has launched a search for a permanent leader.

What's next for Nvidia after Huang's resignation? Let's find out.

Jensen Huang. Image source: Nvidia.

Nvidia's recent troubles

First, a quick summary of what's happened recently. Following allegations that Jensen Huang had an affair with a woman U.S. intelligence says is a Chinese spy, Nvidia's board launched an investigation into the matter. Days later, The New York Times reported that Huang had a second relationship, this time with an Nvidia executive. Nvidia's board then met to consider the next step, and Jensen Huang resigned several hours later. Nvidia named Kress to take over his position as the company searches internally and externally for a new leader.

Following the news, Nvidia stock slipped about 4%, bringing it to a decline for the year.

Before we consider what's next, it's important to consider Nvidia's path so far. Its earnings have soared in recent years, a reward for its transition from a company primarily serving the gaming market with chips to a company fueling the AI revolution. Nvidia's graphics processing units (GPUs) are the fastest around, powering key AI tasks such as the training of models -- and customers have rushed to get in on these premium chips to run their AI workloads.

All of this has generated explosive earnings growth for Nvidia, as we can see in the latest quarter. Revenue and net profit soared in the triple digits to $96 billion and $59 billion, respectively. Huang predicted a 70% increase in revenue for the next full year -- this was the first time he'd offered guidance for the coming year, and he noted it was due to increased visibility.

Nvidia's strength in innovation

Now, let's consider what's next for this top chip company. Huang had pledged annual chip updates, something that has been the key to keeping Nvidia ahead of rivals. Since work on new systems is done well ahead of release, we may expect the flow of innovation to continue amid the search for a new leader. Technology experts within the company, such as Ian Buck, who developed CUDA and is vice president of hyperscale and high-performance computing, may play a key role in this.

Meanwhile, interim CEO Kress, who has demonstrated her deep knowledge of the company and its strategy, is likely to keep Nvidia on track toward established goals. She also has the experience to handle potential headwinds, as Nvidia may not be out of the woods yet. Considering the allegations regarding Huang's relationship with a woman said to be a Chinese spy, the company could face additional questions, regulations, or even fresh chip export restrictions. A Senate committee has summoned Huang to testify next month regarding the situation, and though he's no longer with Nvidia, his comments still could have an impact on the company.

An upcoming earnings release

Investors also should keep an eye on Nvidia's earnings release on Nov. 17 for growth figures, comments on demand, and any statements from the company on what to expect in the coming quarters. The earnings call should be an important moment.

All of these elements may set the tone for the months to come. There is reason to be optimistic about the strengths Nvidia has built over the years, and these should keep the company marching forward. But fresh strategic acquisitions, expansion into new areas, and other "new" moves might not happen during this period of transition.

This means that, while Nvidia may continue to operate pretty much as usual, various uncertainties remain -- and until they are lifted, the stock could see some volatility.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.