Background: Nvidia is one of the most powerful and valuable companies in the world, valued at around $4 trillion. It is the company behind the majority of the microchips and infrastructure powering AI for tech giants like Amazon, Meta, Alphabet, and Microsoft. And its most advanced chips became a big part of US export restrictions, limiting China's access to cutting-edge AI technology.

What happened: This week, Nvidia shares took a 5% hit after reports emerged that CEO Jensen Huang was involved in an affair with a former executive suspected of sharing information with Beijing. Huang himself sent an email to staff admitting he had been "unfaithful to his wife."

What else: Nvidia and Huang are now facing a shareholder lawsuit accusing them of misleading investors about the affair. Huang has been one of the biggest forces behind Nvidia's rise, and any questions surrounding his leadership could rattle investors...

What's the key learning?

💡 When one person is very key to a company, and that company is key to an industry, their mistakes can become everyone's problem. That's key person risk: when a business relies too heavily on one individual, their actions can have consequences far beyond the company itself.

💡 Relying too heavily on one leader can leave a company and its investors vulnerable. We saw it when Elon Musk's public spat with Donald Trump wiped around $150 billion off Tesla in a single day.

💡 Nvidia also carries a massive concentration risk. It controls around 80% of the AI data centre chip market and makes up roughly 8% of the S&P 500. That means every dollar invested in an S&P 500 index fund puts about 8 cents into Nvidia. So a bad day for Nvidia could ultimately mean a bad day for investors worldwide.