THE ECONOMIST: Why Jensen Huang must resign

Jensen Huang is a brilliant man — and a fool. The boss of Nvidia, the world’s leading chip designer and until recently the world’s most valuable company, had an extramarital affair.

His lover was an executive at Megaspeed, a little-known cloud-computing firm that has bought billions of dollars’-worth of Nvidia hardware. American officials think she is a Chinese spy, and that her Singaporean company is a front for smuggling the politically sensitive chips into China.

Even if no further dirt comes out, Mr Huang’s position is untenable. He must resign — or be fired. The same goes for American officials who are implicated in the scandal.

Mr Huang’s admission of infidelity on November 8 followed months of rumours about his relationship with Alice Huang (no relation).

It remains unclear at what point Nvidia’s boss knew that his government thought her to be a spy, or when the affair ended. Nonetheless, he showed a catastrophic failure of judgment.

Romance with a customer creates an obvious conflict of interest. And given his position as the steward of an American technology that China desperately covets, Mr Huang should have been extra wary.

Instead, he lied publicly about the nature of their relationship as recently as last month.

Mr Huang’s transgressions may prove to have been graver still. Questions swirl as to whether Nvidia’s chief counsel intervened last year in an investigation into Megaspeed by America’s Commerce Department, which is responsible for enforcing export controls.

Mr Huang’s advocacy of looser chip controls, ostensibly to keep China hooked on American technology, will now arouse suspicion, as will his championing of Chinese open-source models.

Those who want Mr Huang to stay argue that he is essential to Nvidia, and that Nvidia is essential to America’s lead over China in AI.

Mr Huang is deeply involved in every aspect of the business he co-founded, with roughly 60 executives reporting to him directly — an absurd number.

Yet it is precisely because Nvidia is so important that Mr Huang must go. It is in America’s long-term interests that there be penalties for egregious misconduct at the top of firms that are crucial to national security.

It is not even clear that Nvidia’s shareholders would be served by Mr Huang staying. He would be distracted by the merry-go-round of investigations now under way, including by the FBI.

A scandal-ridden AI billionaire is an easy political target for the newly empowered Democrats. So long as Mr Huang clings to the helm, Nvidia’s credibility in Washington will be as compromised as the man himself.

If he is unwilling to resign, Nvidia’s board should sack him. No boss is irreplaceable.

Half-measures, such as a “phased transition”, would only prolong the damage. Unfortunately, Nvidia’s board has so far been mealy-mouthed. In a statement on November 8th announcing an investigation, it wrote that it “has no reason to believe that either national security or Nvidia secrets were compromised”. But no credible process could exonerate Mr Huang of the misconduct he has already admitted.

Mr Huang is not the only one to have shown dismal judgment. The Commerce Department, under Howard Lutnick, has failed abjectly to stem the flow of the best chips to China. It appears to have allowed Nvidia to keep selling to Megaspeed after concerns over smuggling were raised, and to have resisted calls by the Pentagon and the Treasury to blacklist the Singaporean firm. Like Mr Huang, Mr Lutnick has advocated weaker chip-export controls.

Alas, Mr Lutnick is unlikely to resign. But as Democrats take control of Congress, they will interrogate not only Mr Lutnick but also President Donald Trump, who has bought Nvidia shares and tapped Nvidia to fund his new ballroom.

For two years incoherent policy and lax enforcement have allowed China to gain an edge in the race for a technology that may prove more powerful than nuclear weapons. With luck, that will now change.

For four years Mr Huang has been courted by governments and treated as a rock star. Like many powerful leaders, he came to believe that he was too important for the normal rules to apply to him.

The same attitude can be found, in even larger doses, within the Trump administration.

This culture of impunity must end. It has damaged one of America’s great corporate successes and undermined its national security. After Mr Huang’s, other heads should roll, too.