The global AI landscape was rocked on Thursday as Nvidia CEO Jensen Huang resigned amid a growing extramarital affair scandal. The sudden leadership change at the heart of the AI industry has injected new risks into a sector already grappling with funding and regulatory pressures.
Leadership Vacuum at Nvidia
Nvidia announced that CFO Colette Kress will serve as interim CEO while the company initiates a search for a permanent successor. The company, a linchpin in the AI supply chain, not only provides critical chips but also offers financial backing for infrastructure projects like data centers that utilize its technology. This business model has come under scrutiny due to concerns about its circular financing.
The crisis at Nvidia has cast a long shadow over the entire AI industry. Nvidia’s stock price experienced a significant drop, falling 8.2% in early trading to its lowest level in over 16 months. For the first time since July 2025, the company’s market capitalization dipped below $4 trillion.
Ripple Effect Across AI Ecosystem
The fallout extended to Nvidia’s investments in other AI-focused companies. CoreWeave, a new cloud service provider backed by Nvidia, saw its stock price decline by 9.1%. This came just a day after CoreWeave had fueled a broader AI stock rally with its earnings report, surging over 27%.
Other cloud service providers also felt the impact. IREN and Applied Digital experienced drops in their stock values, while Nebius plummeted 16.2% after announcing that its 2026 revenue would be near the lower end of its previously forecasted range.
Since Nvidia’s board announced an investigation into Huang’s alleged affair on Sunday, the company has lost over $550 billion in market value.
“Nvidia has such a tangled relationship with so many players in the space. Is it going to make the whole industry more stable, or more fragile? We’ll find out in the coming weeks as more clarity comes out,” stated Steve Sosnick, Chief Market Strategist at Interactive Brokers.
Data from ORTEX Analytics revealed that investors betting against Nvidia have accumulated $9.6 billion in unrealized gains this week alone.
Semiconductor Sector Hit Hard
Semiconductor manufacturers, long seen as primary beneficiaries of the AI boom, became major targets of the sell-off. The Philadelphia Semiconductor Index fell 1.3%. Marvell Technology, a company Huang had singled out in June as a potential “next trillion-dollar company,” dropped 3.8%.
Oracle, which has been expanding its collaboration with Nvidia on cloud AI chips, saw its stock decline by 2.6%. Other tech stocks also faced pressure, with Micron Technology falling 2.5%, SanDisk down 6%, and Western Digital off by 3.7%.
Photonics component manufacturers Lumentum and Coherent, along with AI server maker Dell, experienced declines ranging from 3% to 5.1%. Even industrial and power companies were not entirely immune, with Caterpillar and Vistra falling approximately 0.5%.
Competitors See Opportunity
In contrast, two key AI chip rivals, AMD and Broadcom, saw their stock prices rise, gaining 3.7% and 5.6%, respectively. Investors are anticipating that Nvidia’s internal turmoil could create openings for its competitors.
Major cloud service providers like Alphabet, Amazon, and Microsoft also saw their stock prices increase by 0.8% to 2.7%, potentially benefiting from shifts in the market.
Global Market Reactions
The turmoil at Nvidia reverberated through global stock markets. Japanese and South Korean markets closed down nearly 0.7%, and European tech stocks saw a decline of approximately 1%.
Data compiled by the London Stock Exchange Group showed Nvidia’s forward 12-month price-to-earnings ratio has fallen to about 12 times, its lowest point since November 2012.
