Nvidia default risk nears record as board ousts Huang

The cost of insuring Nvidia's ↘ 5.87% debt against default stayed close to record levels on Thursday, Nov. 12, as bond traders priced in the departure of Chief Executive Officer Jensen Huang, Bloomberg reported. Before the board announced its decision, the price of five-year default protection rose by as much as 3.25 basis points to 1.445 percentage points a year, according to ICE Data Services. That was just short of the intraday high set on Nov. 3, The Economic Times reported, carrying Bloomberg's story.economictimes.com+1

The move in credit markets was small compared with the sell-off in Nvidia's stock. Even so, the protection costs have more than tripled since mid-year. They are still only about half the level for lower-rated SpaceX and Oracle ↘ 1.95%, according to the report. Earlier in the day, The Wall Street Journal News Corp ↘ 0.87% noted that default protection costs were unchanged even as the company prepared to remove Huang.moomoo.com+1

Board ends Huang's 33-year tenure

Huang stepped down as CEO and gave up his board seat later on Thursday. Chief Financial Officer Colette Kress was named interim chief while the board looks for a permanent successor, AFP reported. The board, which had never had a chair before, appointed longtime director Harvey Jones, a former Synopsys ↘ 0.16% chief executive, to the role, according to Bloomberg. "The Board has full confidence in Colette and the leadership team," Jones said. He added that operations and the product roadmap should "continue without interruption."afp.com+1

The shares fell as much as 13% in early trading. AFP said about $800 billion has been wiped off the company's value since the weekend. Dan Ives of Yorkville Ives called it "a dark day for Nvidia and the US tech industry." He said the board had chosen to "rip off the band-aid," AFP reported.afp.com

How the crisis unfolded

On Sunday, Nov. 8, Huang admitted to an affair with Alice Huang, a former executive at Singapore-based Megaspeed International who is reportedly suspected of spying for China. On Nov. 11, The New York Times reported a second relationship, this one with Nvidia health-care vice president Kimberly Powell, Yahoo Finance noted. The board, which had expressed confidence in Huang on Sunday, met late Wednesday to decide his future, Reuters reported. Under Nvidia's bylaws, a majority of directors can remove the CEO "with or without cause."heraldsun.com+1

The company also faces a shareholder class action over disclosure of the relationship. Lawmakers on the House Select Committee on China have asked Huang to attend a closed-door briefing on Nov. 18, ABC News reported. Nvidia said it will still report quarterly results as scheduled on Nov. 17, its first earnings since Huang's exit, according to AFP.abc11.com+1