Nvidia (NVDA) stock traded around 155 and was down about 10% after CEO and board chairman Jensen Huang resigned. The resignation followed multiple hearings and questions about an internal affair, including whether people inside the company covered it up, and whether that same kind of cover-up could extend to business dealings. These points are speculation, but together they created an overhang heavy enough to force him out.
What is known
Huang, who owns roughly 3% of Nvidia (NVDA), is out as CEO and chairman. Colette Kress is the interim CEO. Harvey C. Jones becomes the first-ever board chair, a role Huang had also held. The main problem is that the facts are thin, and media coverage tends to jump to the worst case.
Nvidia (NVDA) peaked at a 5.7 trillion dollar market value. It now sits below 4.2 trillion, last calculated at 4.19 trillion, with the stock slightly below that level. That is a 26% loss of market cap during this episode. Over three months the stock is down about 22%.
An open question is whether there was criminal activity tied to moving chips to China underground. That is being investigated. Removing Huang takes away at least part of the uncertainty that markets dislike, even though many questions remain.
Why the company may still be strong
The core argument for Nvidia (NVDA): the product is what matters most, and rival chips have not been able to compete. AMD (AMD) and Broadcom (AVGO) both trade higher after this news, but their chips still trail Nvidia's. During this week's market rotation, AMD (AMD) rose 23% and Broadcom (AVGO) rose 17%, which is the case for holding a diversified portfolio and avoiding concentration risk from putting everything in one stock.
Nvidia (NVDA) holds 85% market share in GPUs. Its price-to-earnings ratio is now below 20, and its forward P/E is below 11. The question investors face: is this a healthy company with 85% GPU share, with or without Huang? The answer is yes.
A reporter named Joanne, who has covered the stock since about 2007, noted that Huang was far more hands-on in engineering meetings 10 years ago and has since stepped back to a more hands-off role. He used to guide some of those meetings directly. That shift should reassure investors, since the company already runs with less of his daily involvement.
Analyst targets
Analysts stayed largely positive. Dan Ives said the stock is worth 300 dollars with Huang and 225 without him. The 225 figure is 50% above the current price. Morgan Stanley (MS) still likes the company but removed it from its top picks list, keeping a 225 target. Several other targets sit at 200 and higher. Most targets remain above 200, well above where the stock trades now.
For context, three years ago the stock was 45 dollars. Despite the near-term pain, it sits far above that level. Each investor has to decide how they see Nvidia (NVDA) over one, five, and ten years. The valuation and the product, not the leadership change alone, are what the decision should rest on. Expect a volatile session.
