Abstract:
Nvidia investors had already turned bearish even before the Jen-Hsun Huang scandal broke out this week. But the sell-off on Wall Street has intensified over the past few days, and the stock may be headed for its sixth straight weekly loss, its longest losing streak since 2012. The chip giant has been the world's most valuable company for most of this year. As of Thursday's close, its market value has evaporated by 29% during this period, shrinking by about $1.6 trillion. Its market value has also been overtaken by Apple.
Nvidia co-founder Jensen Huang, who has been in charge of the company for 33 years, resigned on Thursday. The board of directors appointed chief financial officer Colette Kress as interim CEO and started the selection process for a formal CEO.
Nvidia closed down 4.3% on Thursday, bringing its cumulative decline this week to 11%. News of the first extramarital affair hit the headlines over the weekend, when Huang sent a letter to employees apologizing for his "infidelity to his wife." A second extramarital affair was revealed on Wednesday night, with the other party being the vice president of Nvidia Healthcare, and the board of directors held an emergency meeting afterwards.
Early on Thursday morning, Jensen Huang officially stepped down. The founder of Nvidia, who was once one of Trump's most important allies in the business world, ushered in a dramatic end.
D.A. Davidson analyst Gil Luria wrote in a Thursday research report: "With CEO Huang Jensen regretting his departure, we expect Nvidia to face a difficult transition period in the coming months." He lowered his target price from $300 to $200, but maintained a buy rating. He said: "We believe the market has reasonably priced this management transition."
Nvidia’s stock price has fallen by about 9% last week when news of Huang Renxun’s resignation broke. This round of decline is mainly due to the mid-term election results-the Democratic Party won a big victory, and a number of referendum bills are expected to slow down the pace of AI infrastructure expansion.
In the weeks before the election, Nvidia and other AI sector stocks weakened simultaneously due to concerns about rising interest rates and pressure on highly indebted companies. Although Nvidia itself is extremely profitable, large customers such as Neoclouds are highly dependent on debt financing.
The pressure will be on Kress next week. Nvidia is scheduled to release quarterly results on Tuesday. Analysts expect revenue to rise 91% year-on-year to $108.9 billion, according to Refinitiv data. This scale is 18 times that of the same period in 2022, which is the eve of OpenAI launching ChatGPT and the beginning of the generative AI era.
Oppenheimer analysts said in a research report on Thursday that even if the company's financial report data is expected to be solid, "fundamentals will take a back seat in the short term."
They wrote: "In our view, Huang Jensen's departure may bring continued pressure on the stock price."
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