Ann Wang/REUTERS
The list of the world’s wealthiest people mostly comprises the biggest shareholders of the largest companies on the planet. So why does the cofounder and CEO of the world’s most valuable company rank just 10th?
As of Monday’s close, Nvidia’s Jensen Huang had a net worth of $147 billion, per the Bloomberg Billionaires Index.
That puts him just behind Warren Buffett, who has a $148 billion fortune, even though Buffett’s Berkshire Hathaway is worth about a quarter as much as Nvidia, and Buffett has gifted more than half of his Berkshire stock to foundations since 2006.
Bernard Arnault ranks eighth with a $164 billion fortune, despite LVMH being worth under $300 billion, or less than a 10th of Nvidia.
Elon Musk, the world’s wealthiest person, has an estimated net worth of $383 billion and could extend his lead if his proposed $1 trillion pay package is approved. That’s striking as the two companies that make up the lion’s share of Musk’s wealth, Tesla and SpaceX, are together valued around $1.6 trillion — less than 40% of Nvidia’s market value.
Dilution of shares
There’s one reason Huang, who cofounded Nvidia in 1993 and has been the chipmaker’s CEO ever since, isn’t richer: dilution.
Ahead of Nvidia’s IPO in 1999, Huang owned 12.8% of the company. That stake would be worth over $500 billion today.
While it’s typical for founders to sell shares and see their ownership diluted when their companies go public, Huang has seen a far more significant and prolonged decline in his stake. It fell to 9.9% in 1999, 7.1% in 2003, 4.4% in 2010, then stabilized between 3.5% and 4% from 2020 through this summer, filings show.
For comparison, Buffett owns about 14% of Berkshire, Arnault owns roughly half of LVMH, and Musk owns around 13% of Tesla and 42% of SpaceX.
Huang’s percentage ownership has dropped by more than two-thirds primarily because Nvidia has issued vast amounts of shares to provide equity for its employees. The company reported a hefty $14 billion of unearned stock-based compensation as of July 27, much of which it expected to recognize in around two years’ time.
Nvidia has offset some of the dilution through stock buybacks, but its outstanding shares have surged from a split-adjusted 1.7 billion when it went public, to north of 23 billion now — a roughly 14-fold increase.
Many companies, especially in the tech space, award employees with stock or stock options to incentivize them to increase the value of the company and its stock, while discouraging them from decamping to rivals. It’s a way to attract and retain talent without spending cash.
Huang’s stake has also shrunk because he’s sold shares, including a prearranged trading plan to dispose of up to 6 million shares this year, worth about $1 billion at Nvidia’s current stock price.
The rich list changes as companies’ market caps fluctuate, but Huang’s smaller stake means he’s unlikely to top it anytime soon.
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