The US semiconductor is designed around designers, and those designers are well compensated via stock options. Simply, if you join a company today, and the share price is $10, and they give you 1000 units of the shares, and if in the future, the share price appreciates say to $50, you have made $40,000 when you exercise the agreement! The idea there is to incentivize engineers to come up with product innovations which will drive the appreciation of the company valuation.
Sure, it is not exclusive to engineers and designers, but if two employees, designer and non-designer, are at the same level, if you look deeper, both may be getting paid the same dollar amount, but the designer likely has a more generous stock option.
When I was in the industry, we attended a meeting and towards the end of the meeting, one of the designers asked the Vice President what was his major concern with the group; he responded: the stock is going up, and if this continues, these seats may be empty, explaining the challenges he faced before the dot-com bubble, on how people cashed out and left the company.
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In other words, if the stock price continues to rise, people will become rich, and can just retire. According to him, the problem was so bad during the dot-com era that many projects were canceled as they could not find people to do the work!
Good People, Nvidia seems to have that problem now. Some of its technical staff with stock options are becoming very rich as the company continues its valuation ascension, to the extent that some mid-level engineers have made $20 million on stock options. Watch out, most will retire! That is a huge problem for Nvidia!
The wealth that can be gained from helping to propel a successful company is vividly illustrated by a recent Tweet/X by Barron’s writer Tae Kim. One “mid-level” Nvidia employee accrued a fortune of $62 million, claims Kim. Thus, company share schemes can be a great incentive for employees. However, as a counterpoint, the senior Barron’s reporter also knows of at least one Nvidia employee who made a “half billion dollar mistake,” after their ‘green-gold’ slipped through their fingers.
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In other words, having a very high valuation is also a problem. So it’s either the stock price stops rising exponentially or the rich employees will pull the plug and bring Nvidia back to earth. Either way, Nvidia is walking a fine line, bordering on palpable vulnerability. Even success is an illusion…
There should be redesign of in-short-time succession plan. That can best fit the trend and a model to covert a potential retiree to passive development channel.