Nvidia: are there companies too big to fail?

Following the 2008 financial crisis, New York Times journalist Andrew Ross Sorkin wrote the book Too big to fail (in Spanish, 2008: La batalla por salvar al sistema financiero, Debate),later adapted for television. The expression became popular to describe the role of financial entities in capitalism and their ability to transmit their problems and the effect of their irregularities to the system as a whole. In 2008, the outbreak of the crisis following the collapse of Lehman Brothers, with a prior warning from Bear Stearns, was an example of the ease of this contagion, not only on a national scale in the United States, but also globally.

Until a few days ago, Nvidia was an example of a great company, with a capacity for growth that seemed limitless and with a potential that it likely still has, given the orders it is receiving amidst the boom of artificial intelligence (AI). The problem is that this technological giant (tech companies have for the moment replaced banks as objects too big to fail – the title of Sorkin's book) has reached a value equivalent to the gross domestic product (GDP) of Germany, with more than five trillion dollars.

And who is this company in the hands of? A CEO, Jensen Huang, to whom a romantic relationship with an alleged Chinese spy is attributed, which is a real problem for such a strategic company. Should this technological colossus depend on a single person who, in addition to having an overly pronounced romantic tendency towards dangerous people, maintains close ties with the President of the United States, Donald Trump?

Since the love affair broke out,the price of Nvidia has shed more than 600 billion (an amount equivalent to triple the price of Inditex, the highest-valued company on the Ibex-35, the main benchmark of the Spanish stock market). After a board meeting on Wednesday, the details of which did not transpire, Huang has announced his resignation. The situation did not have many other possible exits, considering that, furthermore, Huang manages a company that is a true strategic asset.

Nvidia’s magnitudes are astronomical, like those of the other large tech companies, some of which have surpassed it in value, and which recall the famous too big to fail. Constant appeals are made for SMEs to gain scale. In fact, this is a way to improve productivity and provide higher wages to workers, all experts assure. But lived experiences demonstrate that, for this to function as it should, very powerful and serious internal oversight mechanisms are necessary in companies. But at the same time, they must be compatible with powerful independent bodies that periodically monitor the governance of large companies. Especially those that, as is the case with Nvidia, move gigantic amounts of capital that attract thousands of shareholders, many of whom are individuals and families who entrust a portion of their savings (if not all). If not, perhaps there really are companies too big to fail.