Jensen Huang’s Resignation Leaves a Massive Funding Gap in AI Startups

The resignation sent shockwaves through the tech world. After co-founding and leading Nvidia for 33 years, embattled CEO Jensen Huang officially stepped down. When the news first broke, one neocloud founder remarked to TechCrunch, “It’s like a bomb went off.”

In recent years, Nvidia has acted as a prolific investor, channeling tens of billions into startups annually. The company participated in 105 investment rounds this year alone, frequently serving as the largest investor, PitchBook data indicates. “If that direction changes, it’ll be a big blow to so many young companies,” stated Maria Davidson, founder of Relational Capital.

Investors argue that Huang's departure leaves the startup ecosystem without one of its most significant champions and with a immediate shortage of capital. This absence is expected to have a sweeping impact on dealmaking, valuations, funding availability, and overall market competition.

“Nvidia is carrying almost every AI-native startup from application to neocloud,” explained Shamilla Bankiya of Dawn Capital during an interview with TechCrunch.

Umesh Padval, a managing partner at Seligman Ventures, noted that most significant investment decisions often originated from Jensen directly. Padval has known Huang since serving on the board of Mellanox Technologies, a networking chipmaker Nvidia acquired for about $7 billion in 2020. While there is hope that the successor will eventually pick up the dealmaking pace, investors remain skeptical about a quick return to previous levels.

Nvidia’s interim CEO, Colette Kress, is anticipated to implement changes, particularly regarding investments in AI startups central to the billion-dollar data center build-out. Huang’s aggressive dealmaking in this sector has previously raised concerns on Wall Street.

Describing Kress, one investor remarked, “She’s much more conservative,” adding, “I don’t think she’s going to commit the same amount of money to keep the early-stage ecosystem going.”

Nvidia’s primary bets have focused on backing neoclouds, inference providers, and open weight models, areas that are expensive for smaller companies to develop independently. “Jensen’s initiatives are a big reason an ecosystem has emerged despite that,” stated Zain Javid, co-founder of the hardware company Ghost.

For example, Nvidia backed CoreWeave while it was still private and participated in two funding rounds for Crusoe, including its $1.4 billion Series E. The company purchased Hugging Face this year for $13 billion (expected to close in 2027) and holds stakes in Mistral AI, Lambda, and Black Forest Labs. Nvidia often served as the largest investor in these deals. Last year, the company wrote an $800 million check into a $2 billion Series B round for Reflection AI, according to the Wall Street Journal, prior to the open-source startup generating meaningful revenue.

“Jensen believed in open source and frankly speaking, Europe,” Bankiya observed regarding Huang’s global investment strategy. The potential cessation of this support in regions outside the United States, such as Europe, would create “a massive funding and honestly ecosystem gap that no one can fill.”

It is also true that Nvidia was such a dominant player in the ecosystem that it often resembled a monopoly. By backing numerous companies with substantial checks, Nvidia effectively locked those startups into using its chips, thereby reinforcing its dominant market position.

If the company grows more conservative with its startup investments, it could open the door for rivals and smaller competitors. Coincidentally, Google announced two new chips this week amidst the fallout from Huang’s departure.

Several investors expressed hope that large cloud providers and other chipmakers will step in to back startups and help fill the void left by Huang.

Dharmesh Thakker, a general partner at Battery Ventures, anticipates that big tech rivals will vie for Nvidia’s investment crown. He noted they must offer “the best combination of a great product, an ecosystem and community to compete with CUDA, and the financial power to bankroll the ecosystem.” CUDA is Nvidia’s software platform enabling developers to run AI models on its GPUs.

While companies like Google, Amazon, Microsoft, and AMD might back mature startups to drive adoption of their chips and clouds, Thakker doubts they will invest hundreds of millions into pre-revenue infrastructure startups in the same manner as Nvidia.

Under Huang, infrastructure companies requiring $100 million to $500 million in GPUs would often secure half that amount at valuations exceeding $1 billion from Nvidia to get off the ground. The chipmaker’s participation provided other investors with the confidence to back these companies at such high valuations.

Currently, Nvidia is expected to be more selective regarding new investments while writing smaller checks to its existing portfolio, a shift likely contributing to falling valuations.

Nevertheless, few believe Nvidia’s investment slowdown will alone halt the broader AI boom. Despite acknowledging Huang is a massive loss for Nvidia, Amulya Vishwanath, a former employee who now runs her own VC fund, emphasized that “founders and leaders must be held accountable.” She added that the ecosystem is bigger than one person, stating, “That talent will, and must, continue to thrive.”