Warren Buffett Said ‘We Can Afford to Lose Money’ But Not ‘Even a Shred of Reputation’ — Nvidia’s Board Just Showed What That Means With Jensen Huang’s Exit

On Sunday, Nvidia’s Corp.’s . (NASDAQ:NVDA) board said it had confidence in its CEO. By Thursday, it had accepted his resignation.

Co-founer Jensen Huang has resigned as president, CEO and a member of the board, effective immediately, the company said Thursday. His exit ends a 33-year run atop the chipmaker he built into the engine of the AI boom.

Nvidia chief financial officer Colette Kress will serve as interim CEO while keeping her finance job, and former Synopsys Inc. (NASDAQ:SNPS) CEO Harvey C. Jones becomes the company’s first-ever board chair. The board is searching inside and outside the company for a permanent replacement.

The speed of it all reads like a page out of the playbook Berkshire Hathaway Inc. (NYSE:BRK) (NYSE:BRK) Chairman Emeritus Warren Buffett handed his own managers for decades.

Buffett’s Favorite Memo Barely Changed

“We can afford to lose money — even a lot of money,” Buffett wrote in a 2014 memo to Berkshire managers. “But we can’t afford to lose reputation — even a shred of reputation.”

He sent a version of that line to his managers every two years for more than 25 years. Its roots go back to 1991, when Buffett stepped in as interim chairman of Salomon Brothers after a Treasury auction scandal rocked the Wall Street firm.

“Lose money for the firm, and I will be understanding,” Buffett said in testimony before Congress in 1991. “Lose a shred of reputation for the firm, and I will be ruthless.”

The Board’s Vote Of Confidence Had A Short Shelf Life

The trouble started Oct. 29, when The New York Times reported that U.S. intelligence officials had concluded Alice Huang, an executive at Singapore-based data center company and Nvidia customer Megaspeed, was passing information to Beijing. The Times reported she had developed a close relationship with Huang.

An Nvidia spokesperson told TechCrunch at the time that Huang’s interactions with her were “not unusual or unexpected.” China’s foreign ministry called the report “groundless speculation.”

Republican House Foreign Affair Committee Chairs Brian Mast, House Select Committee Chair John Moolenaar and House Permanent Select Committee on Intelligence Rick Crawford on Nov. 5 asked Huang for a closed-door briefing on Nov. 18.

Then on Sunday, Huang admitted to an extramarital affair in a memo to employees.

“I was unfaithful to my wife,” Huang wrote. “My actions hurt her and our children. There is no excuse for what I did. I am deeply sorry.”

The same day, the board opened an independent investigation. Directors said they had “no reason to believe” national security or Nvidia secrets were compromised and that the board “has confidence in Jensen and his leadership team.”

That confidence didn’t survive the week. According to a Times report on Wednesday, Huang had also had a relationship with a senior Nvidia executive who reported to him. The board accepted his resignation that same day, according to a regulatory filing.

Thursday’s announcement thanked Huang for his “immeasurable contributions” but gave no reason for the departure and included no statement from Huang himself.

Wall Street Sends Its Own Memo

Nvidia shares sank more than 13% in early trading Thursday before paring some losses. The stock was already bruised, falling nearly 9% last week and sitting more than 21% below its early-October peak, a slide that erased roughly $1 trillion in market value.

Kress gets a high-profile first test fast. Nvidia still plans to report third-quarter results on Tuesday, as scheduled.

“Nvidia’s strength has always come from its people, and together with our leadership team, I am committed to building on the extraordinary foundation Jensen created over the last 33 years,” Kress said in a statement.

Share prices bounce back from bad days all the time. Buffett spent decades warning that reputations run on a slower clock, once writing that Berkshire’s standing took 43 years to build and could be lost in 43 minutes.

Nvidia’s board has picked which ledger it’s protecting. Tuesday’s earnings report will start to show what the other one costs.

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