Jensen Huang spying controversy will cast long shadow over Nvidia, veteran tech strategist warns

The rocky road ahead for Nvidia (NVDA) and its CEO Jensen Huang is only just beginning, even though we’re just days of intense media coverage from the debacle, veteran tech strategist Ted Mortonson warned.

“Talking to institutional clients, Jensen is the face of the company, and anytime you mention espionage as ex-military, it’s a whole different dynamic,” Baird strategist Ted Mortonson said on Sozzi Unleashed. “So this opens up huge investigative opportunities, not only for Republicans and Democrats, but also for the FBI. And it’s going to last a long time. So there’s going to be this cloud over the company, even though it’s two to three years ahead of its competitors, both in software and in silicon.”

Mortonson’s colleagues today lowered their rating on Nvidia to Neutral. Analyst Tristan Gerra’s note was titled “The Rise and Fall of Icarus; society will be fine.”

Huang admitted the affair Sunday in an email to employees. Nvidia shares are down about 9.6% since the situation became public.

Nvidia’s board of directors launched a independent investigation in reports that the woman Huang had an affair with was allegedly a spy for the Chinese government. The board said it hired the powerful law firm Wachtell, Lipton, Rosen & Katz to conduct the investigation. Former Acting U.S. Attorney for the Southern District of New York Joon Kim will lead the investigation.

Mortonson said his customers are turning to Nvidia rival AMD (AMD), whose shares are up 13% in the past five days.

The end game for Nvidia could involve much more than just Huang leaving as CEO, Mortonson said.

“It could be restrictions on certain markets or even, you know, tighter controls from the Department of Commerce,” he said. “Singapore has always been this gateway country to China, so to speak.

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