Jensen Huang's resignation Thursday as chief of AI giant Nvidia whiplashed markets on Thursday as tech stocks sank but then quickly rebounded.
Jensen, co-founder of the world's leading designer of the chips that power AI models, stepped down in the face of a board revolt following revelations he had two extra-marital affairs, including with a woman accused of spying for China.
Chief financial officer Colette Kress will serve as interim CEO while keeping her finance role, and the board will consider internal and external candidates for a permanent replacement.
Shares in Nvidia, which is due to report quarterly earnings next Tuesday, plunged 13 percent at the start of trading in New York.
Wall Street's tech-heavy Nasdaq Composite dropped 1.5 percent as trading got under way.
"A leadership scandal at one of the world's biggest companies is enough to bring the tech stock rally to a halt," said Kathleen Brooks, research director at trading group XTB.
But the tech stock rally hit an air pocket, not a wall. By midday the Nasdaq was back in the green, as was the Philadelphia Semiconductor Index, which tracks the major firms in the AI chip sector.
"It’s usually best to rip off a plaster rather than prolong the agony," said Chris Beauchamp, chief market analyst at online trading and investing platform IG.
"Jensen’s decision to fall on his sword and leave the company he led to global fame is probably the best thing for the stock and Nvidia itself," he added.
Investors will now be looking ahead to Nvidia's results call next week.
"The integrity of the $1 trillion (revenue) forecast, in the wake of this scandal, is likely to be a key question on Nvidia's earnings call next week," XTB's Brooks said.
The stock has shed over a third of its value since setting a record high last month, wiping around $1.7 trillion off its market capitalisation.
Huang built Nvidia into one of the world's biggest and most important companies, designing advanced chips crucial to the AI buildout that has helped drive stock markets to record highs and boosted economies around the world.
But analysts say the crisis has exposed an alarming lack of a succession plan for Huang, the only CEO Nvidia has ever had.
"An abrupt exit without a credible succession plan could force investors to reassess how much of Nvidia's future depends on Huang personally," said Charu Chanana, chief investment strategist at Saxo Markets.
"For Nvidia, Huang was more than a CEO -- he was part of the investment thesis," said etoro US investment analyst Brett Kenwell.
Companies linked to the AI sector had enjoyed a healthy bounce in recent days after last week's sell-off sparked by regulatory concerns following the Democratic sweep of the US Congress, as well as worries about whether the massive investments being made in the sector will ever prove profitable.
