By Olivia Hart

Nvidia Corporation shares were down more than 7% in premarket trading and nearly 7.5% at the latest reading. The move turned the stock negative for the year and extended its five-day loss to more than 13%.

The decline followed a Wall Street Journal report that Nvidia's board had convened to consider removing cofounder and CEO Jensen Huang. Uncertainty over Huang's status and the leadership structure that could follow now accounts for most of the market reaction.

What triggered the sell-off?

On Sunday, Huang admitted to an extramarital affair with a woman whom U.S. intelligence officials believe could be a Chinese spy. The disclosure raised severe national-security concerns and drove a steep sell-off in Nvidia shares.

The board initially backed Huang, saying it retained "confidence in Jensen and his leadership team." The statement also said it had no reason to believe Nvidia's secrets or national security had been compromised.

The next day, The Wall Street Journal said the board was meeting to determine whether to oust Huang. The report followed news of an alleged second affair, this time involving a subordinate who works at Nvidia.

Huang's fate remains unknown. Investors must now price both the board's decision and the leadership arrangements that would follow it.

What are the stakes for investors?

Nvidia already faces shareholder lawsuits, and a series of congressional investigations is likely. The risks extend beyond reputation to the earnings, strategy and execution consequences of replacing a founder-CEO during a national-security inquiry.

Richard Reyle of Questar Capital Partners told CNBC that Nvidia faces a choice between "keeping Jensen and being faced with . . . all kinds of interrogations" or "they're going to have to move on from him." Either path, he said, would "make the stock uninvestable."

Nvidia shares have fallen more than 33% from their all-time high above $239 in early October. At that peak, the company's valuation exceeded $5.7 trillion, making it the most valuable public company in history; after the scandal, the valuation stands below $4.2 trillion.

Why does the succession gap matter?

Nvidia has no publicly known plan for replacing Huang. That gap magnifies the uncertainty created by the board review and the alleged conduct behind it.

Questions that an advance-planned transition resolves, including who sets strategy, protects the bottom line and sustains morale and productivity, now remain open. Apple telegraphed its earlier CEO transition from Tim Cook to John Ternus; Nvidia has disclosed no comparable preparation for Huang.

The company may have an undisclosed succession plan, but the board would likely acknowledge at least its existence given the uncertainty. Investors cannot assume that such preparation exists without evidence.

If Huang leaves, Nvidia must select either an internal executive or an external candidate. The likely external profile would demand deep knowledge of artificial intelligence or chip design, given the scale and strategic importance of a company many investors see as the AI economy's backbone.

Who could replace Huang?

Three internal executives hold positions that make them visible candidates:

• Colette Kress, chief financial officer.
• Ian Buck, vice president of Hyperscale and High-Performance Computing.
• Michael Kagan, chief technology officer.

Citi analysts Atif Malik and Papa Sylla consider Kress a likely interim chief while Nvidia searches for a permanent successor. Their view provides a bridge, not an answer to the longer-term leadership question.

Morningstar says Buck strikes it as a logical successor to Huang because he is well known to outside investors. For now, no one knows who would replace Huang if the board removes him, and no internal or external search has produced a disclosed nominee.

What happens next?

The board must resolve Huang's status. Each outcome carries a different execution burden for a company whose valuation has fallen below $4.2 trillion.

Keeping Huang would leave the board's stated confidence alongside continued scrutiny over leadership and national security. Removing him without a disclosed succession framework would replace one uncertainty with another: whether a new leader can preserve strategy, earnings and investor confidence.

Until the board resolves Huang's status and Nvidia identifies its succession approach, the lack of a public handover plan remains a structural risk rather than a temporary headline. That matters more than the board inquiry alone because it can keep weighing on Nvidia's share price for years.

Morningstar is owned by Joe Mansueto, the owner of Fast Company parent Mansueto Ventures.