Bullseye American Ingenuity Fund portfolio manager Adam Johnson explains why Nvidia stock remains a buy despite the board’s investigation into CEO Jensen Huang. He says the company’s growth outweighs the executive scandal.
Artificial intelligence giant Nvidia is facing investor scrutiny over concerns about the company’s future amid its internal investigation into CEO Jensen Huang’s affair with a suspected Chinese spy.
Huang admitted to being unfaithful to his wife in a statement released Sunday, in which he also said he had failed to fulfill his responsibilities to the company and said he would cooperate with the investigation.
Nvidia’s board has launched an independent investigation into the matter, saying that while it has no reason to believe national security or company secrets were compromised, the investigation will review all available information.
The controversy prompted some companies to change their valuation of the company’s stock, as Baird issued a rare downgrade of Nvidia’s stock – dropping the AI giant’s rating to “neutral” due to a lack of visibility on data center spending in 2027, possible weakness in demand and uncertainty over Huang’s tenure.
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Nvidia CEO Jensen Huang said Sunday that he would cooperate with the investigation and was committed to Nvidia and U.S. national security. (Sean Rayford/Getty Images)
Morgan Stanley also removed Nvidia from its Top Pick list, although the company retained its “overweight” rating on the stock, whose share price has seen a decline of more than 25% since receiving that designation last month.
“We recognize that near-term uncertainty will persist, as we believe CEO Jensen Huang’s leadership is critical to the company’s direction,” Morgan Stanley analysts said in a note.
Bank of America Global Research also removed Nvidia from its US 1 list, while at least three other brokerages – including Wells Fargo and Citigroup – cut their price targets for the stock earlier this week.
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Huang co-founded Nvidia and transformed the company into a leader in the AI race. (Patrick T. Fallon/AFP via Getty Images)
Nvidia shares were caught in a broader tech selloff after midterm elections showed Democrats winning majorities in both houses of Congress, with the stock’s woes deepening amid the controversy.
In the first two trading sessions after Huang revealed the affair and Nvidia’s board opened its investigation, the company lost more than $427 billion in market capitalization.
The stock rebounded during Wednesday’s trading session, rising about 3.5% by mid-afternoon.
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| Teleprinter | Security | Last | Change | Change % |
|---|---|---|---|---|
| NVDA | NVIDIA CORP. | 173.73 | +4.84 | +2.87% |
Even as investors question Nvidia’s prospects, the company remains one of the most valuable stocks on Wall Street.
Nvidia has a median price target of $314, according to LSEG data, implying roughly 82% upside from its current levels, with 59 of 64 brokerages rating the shares a “buy” or “strong buy.”
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Reuters contributed to this report.
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