Nvidia CEO Huang's multibillion-dollar charitable windfall puts philanthropic strategy in focus

Nvidia Corp.’s stock surge over the past two years has, in theory, created a multibillion-dollar windfall for the philanthropic world – but only if Chief Executive Officer Jensen Huang and his wife Lori give the money away.

The couple had stockpiled 69 million Nvidia shares in the Jen-Hsun & Lori Huang Foundation by the end of 2022 through repeated annual donations that began almost two decades ago, public tax filings show. The blistering rally in the company’s stock puts the value of that stake at more than $8 billion, according to John Seitz, the founder of FoundationMark, a firm that tracks foundations’ investment performance.

Even that figure may understate the amount of charitable assets now at the couple’s disposal. Documents show that a charity run by Charles Schwab Corp. controls an additional $4.4 billion of Nvidia shares, at least some of which are held in a donor-advised fund for the Huangs and their foundation.

Those sums far exceed what the foundation has reported giving away. From its creation in 2007 through 2022, it has donated or pledged about $65 million to outside nonprofits, primarily Stanford and Oregon State universities. It has also given about $125 million, primarily in the form of Nvidia shares, to the GeForce Fund, a DAF account the Huangs set up at the Schwab Charitable Fund. 

This give-and-hold strategy has left the couple with a pool of assets to support charitable endeavors that now ranks among the 20 largest private foundations in the US. 

But there has also been a debate in the philanthropic world over the growing use of this approach to get immediate tax breaks for charitable donations that can be invested indefinitely, cutting into the flow of funding that would otherwise go to working charities.

“Congress has these rules regarding charitable donations and allowing very generous tax deductions with the idea that the funds are going to charities,” said Dean Zerbe, a national managing director at Alliantgroup, who formerly worked as tax counsel to the US Senate Finance Committee. “The money just sitting there is against the intent and the spirit of our laws regarding charitable donations.”

A spokesperson for the Huangs declined to comment beyond a statement about their foundation’s work: “The Huang Foundation supports higher education, public health, and STEM initiatives across the US, alongside local community organizations in the San Francisco Bay Area.”

A Schwab Charitable representative said its donors granted $6 billion to charities last year, up 31% from 2022. 

Giving Rule

The rapid increase in value of Nvidia’s stock, fueled by insatiable demand for its artificial intelligence chips, means the Huangs must give away a lot more money under a rule that requires private foundations to distribute at least 5% of their assets annually. That could be a challenge, given that theirs has been a bare-bones operation. 

The Huang foundation uses the address of the Palo Alto, California, accounting firm that handles its tax filings and says its only officers are Lori, its president, and Jensen, the secretary and chief financial officer. They each work an average of one hour a week, according to tax filings, which also show that the foundation has never incurred any compensation costs.

“Their operating expenses are de minimis,” Seitz said. “This indicates they may be kicking the can down the road in terms of their charity.”

Under Internal Revenue Service rules, people can get tax breaks when they donate cash, securities or other assets to private foundations that they set up to administer their philanthropic pursuits. The foundations, in turn, are required to give at least 5% of their assets to public charities each year. 

The Huangs, like many other billionaires, have been meeting their foundation’s annual distribution requirement primarily through gifts to the account at Schwab Charitable. The assets in such accounts can be invested indefinitely because DAFs are classified as public charities, which aren’t subject to the IRS’ annual distribution requirements.

As a public charity, Schwab Charitable doesn’t have to disclose specifics about client investments and gift-giving, another reason that DAFs have become so popular among the wealthy. But Schwab Charitable is one of the only DAFs that discloses some information about stocks in client accounts through a quarterly report required of money managers such as hedge funds and private equity firms.

In its Form 13F filing with the US Securities and Exchange Commission, Schwab Charitable mainly reports on its Nvidia stock, which it has disclosed holding since it began submitting the documents in 2018. The stake has roughly doubled over the past six years to 35 million shares, with an estimated market value of $3.17 billion at the end of March.

Schwab Charitable’s stake has included stock that the Huang foundation donated to the GeForce Fund — named after the brand of Nvidia’s gaming product line, according to a person familiar with the matter.

Most DAFs require clients to sell donated stock immediately so that the money can be invested in mutual funds and exchange-traded funds, including those run by the firm itself. On the other hand, both Schwab and Fidelity allow larger DAF accounts to hold a broader range of assets. 

Under IRS rules, donors relinquish ownership and control of assets placed in a DAF in return for the tax breaks. While they’re allowed to make suggestions on investments and gift-giving by their accounts, the final decision on such matters rests with the sponsor of the DAF.

But sometimes these boundaries become blurred. 

“Even though the charity technically owns it, the donor is functionally controlling it,” said Ray Madoff, a professor at Boston College Law School and director of the Forum on Philanthropy and the Public Good.  

Casey Summar, managing partner at the Law Firm for Non-Profits, said Schwab Charitable, as the fiduciary for the DAF, has the leeway to determine that it may be better to hold securities that have room to grow.

If “there are no gifts to be made immediately, it may be prudent for them to hold it,” Summar said. That is, “if the stock is expected to appreciate.”