💰 Big Leather Jacket To Fill

THE MAIN EVENTBig Leather Jacket To Fill 🧥

Nvidia has had one CEO in its 33 years. As of Thursday morning, it's looking for its second.

The board said Jensen Huang has resigned, effective immediately, and CFO Colette Kress is running the company until it finds someone permanent.

Unfortunately, you didn't have to own Nvidia stock to carry the risk. An S&P 500 fund was enough.

From Founder To Former In Four Days 🗓️

• Sunday: The board opened an investigation after reports that Huang had been "the target of a foreign intelligence effort," and he admitted to staff that he'd had an affair. U.S. intelligence agencies suspect the woman, a former executive at Singapore data center company Megaspeed, of spying for China.

• Wednesday: The New York Times reported a relationship with a subordinate, and The Wall Street Journal reported the board was preparing to remove him.

• Thursday: He was out.

Since the Friday before the news broke, the stock is down 11%, almost $500 billion in value. Nvidia is now the world's second most valuable company, behind Apple.

Your Index Fund Had A Key-Man Problem 🧩

The whole point of an index fund is that you never have to bet on one company, let alone one person.

But at Wednesday's close, Nvidia made up 6.4% of the S&P 500. For every $100,000 in an S&P 500 fund, about $6,400 was riding on a founder with no named successor.

Nvidia saw the risk. Its annual report warned in February that "failure to ensure effective succession planning" could hurt the business. The warning never mentioned Huang by name.

3 other companies in the index's top 10 do name their key man:

• Broadcom (2.5% of the index) relies on "the services of Hock E. Tan," its CEO since 2006.

• Meta (2.1%) depends on key people "including Mark Zuckerberg."

• Tesla (1.7%) is "highly dependent on the services of Elon Musk, Technoking of Tesla."

Count Nvidia, and about one-eighth of the S&P 500 is tied to 4 people.

What Happens When The Boss Leaves 📉

I went back through 7 famous CEO exits to see what happened next.

The first trading day offered few clues, with 4 of the 7 stocks moving 3% or less. The following 3 years were more revealing.

Only 2 beat the market:

• Apple after Steve Jobs: +90%, versus +70% for the S&P 500

• McDonald's after Steve Easterbrook: +39%, versus +23%

The other 5 lagged:

• Intel after Brian Krzanich: +5%, versus +53%

• HP after Mark Hurd: -42%, versus +51%

• Microsoft after Bill Gates, Amazon after Jeff Bezos, and Wynn Resorts after Steve Wynn also trailed, despite having successors ready.

2 of the 3 worst results came from departures that most resemble Nvidia's.

Hurd and Krzanich both left over personal conduct, and both companies handed the job temporarily to their CFO while the board searched.

7 examples don't make a rule, and HP and Intel had plenty of other problems. But every case points to the same lesson: the market's first reaction mattered far less than the strategy, succession, and execution that followed.

So Nvidia's 11% decline may reflect the shock of losing Huang. But it doesn't necessarily reflect all the damage, or opportunity, that comes next.

Risks To The AI Trade 🔌

There's one more reason the next CEO matters. Besides selling AI chips, Nvidia also finances the companies that buy them.

In January, it put $2 billion into CoreWeave, which rents Nvidia chips to AI companies. Critics call deals like that circular, since the money tends to come back as chip orders.

Kress knows that playbook. As CFO, she was reportedly a key architect of Nvidia's customer-financing deals. The question is whether an interim CEO and a board under scrutiny will keep placing those bets as aggressively.

We'll get the first read Tuesday, when Nvidia reports earnings.

For the rest of the AI risk map, Lane Kawaoka and I covered power shortages, cheaper Chinese models, and the price of renting an Nvidia chip on The Wealth Elevator.

Give it a listen and drop a comment.

MARKET MOODYields Up, Nvidia Down, Stocks Bounce Anyway 🤷

Winners

AMD & Broadcom

$AMD / $AVGO  ·  Cap $959.9B / $1.74T  ·  Week to date ▲ 30.3% / ▲ 24.1%
Chip stocks bounced back from last week's crash, thanks to Jensen spreading the love. Investors bet Nvidia's customers would diversify their orders, so its 2 biggest rivals added about $560 billion in market cap.

CoreWeave

$CRWV  ·  Cap $31.2B  ·  Week to date ▲ 22.0%
CoreWeave, which rents out AI chips, borrowed heavily to build data centers, and investors worried the boom would cool before the bills came due. Then its quarterly results showed customers had already signed up for $132.5 billion of future work, and it raised its sales forecast.

Tesla

$TSLA  ·  Cap $1.57T  ·  Week to date ▲ 11.0%
Driverless Teslas started giving rides in San Antonio, the company's fifth Texas city and its biggest launch zone yet. Bloomberg also reported that a SpaceX merger could be announced as soon as December.

Losers

Hims & Hers

$HIMS  ·  Cap $4.6B  ·  Week to date ▼ 24.1%
Hims is now selling more brand-name weight-loss drugs at lower margins. It kept 57 cents of every sales dollar after product costs, down from 74 cents a year ago, and swung to a loss.

Moderna

$MRNA  ·  Cap $93.6B  ·  Week to date ▼ 9.0%
Moderna's cancer vaccine cut the risk of melanoma coming back, pushing the stock up more than sevenfold this year. But its investor day offered no 2027 forecast, so investors took profits.

Lennar & D.R. Horton

$LEN / $DHI  ·  Cap $19.9B / $39.2B  ·  Week to date ▼ 5.8% / ▼ 5.1%
Consumer prices rose faster than expected in October, and traders now fully expect the Fed to raise rates in December. Higher rates hit homebuilders because most buyers need a mortgage to buy a new home.

FAST FACTSPaid In Cash, Charged On Card 💵

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THE ODDSIt's Beginning To Look A Bit Like Shutdown 🎄

CHART OF THE WEEKFewer Flyers, Fatter Fares ✈️

Source: Hopper

Holiday fares jumped because fuel did, and airlines are betting you'll pay up anyway.

• Jet fuel set a record. It reached $4.90 a gallon on Oct. 22, more than twice what it cost a year earlier.

• Fewer people are flying. Since April, about 9.3 million fewer travelers went through airport security than a year earlier.

• Airlines are still coming out ahead. The 5 major U.S. carriers took in $8.8 billion more from passengers last quarter, while traffic grew less than 1%.

Still need a seat? I wouldn't wait past Nov. 18, a week before the Thanksgiving Eve rush, when fares usually jump again.

WORDS TO REMEMBERDon't Count Your Paychecks Before They Clear 🧠