Nvidia stock has taken a battering amid deepening scrutiny of CEO Jensen Huang. The first calls that he will be forced to leave are emerging -- but that doesn't mean analysts are souring on the shares.
The shares were up over 3% in early trading Wednesday. But the stock is down 24% over the past month, with losses deepening this week since Huang acknowledged an affair with a woman accused of spying for China.
Baird analyst Tristan Gerra downgraded his rating on the stock to Neutral from Outperform and slashed his target price to $200 from $500 in a research note Wednesday.
Most notably, Gerra suggested Huang might have to step down -- the first such call on Wall Street.
"We contend a new CEO is needed to establish internal safeguards to align with existing and upcoming U.S. policies enforcing restrictions to China's access to U.S.-made AI technologies, and to re-establish trust both externally and internally," Gerra wrote.
Republic Senator Kevin Cramer -- a senior member of the Senate Banking Committee -- and former National Economic Council Director Larry Kudlow both called for Huang to step down on Tuesday.
The company said Tuesday that law firm Wachtell Lipton will lead an independent investigation into whether Nvidia was the target of foreign espionage. Former federal prosecutor Joon Kim will lead the investigation.
Mizuho analyst Vijay Rakesh slashed his target price on Nvidia to $250 from $315. But he still expects Huang to survive.
"We believe [the] main risk for Nvidia is the potential departure of CEO Jensen Huang," Rakesh wrote. "However, with Jensen Huang as the key founder and leader, and with strong board support, we see the risk minimized."
Rakesh's price target is based on a price-to-earnings multiple of 16 times his forecast for Nvidia's fiscal 2028 earnings, which are largely the same as calendar year 2027. That's a fairly undemanding valuation for a company he expects to grow its revenue and earnings by more than 70% that year.
Nvidia currently trades at a forward PE ratio of under 12 times according to FactSet. The company is set to report its earnings on Nov. 17.
"Believe it or not, as far as growth stocks go, there is not a cheaper stock from a valuation point of view in the entire market than Nvidia is right now," said Bill Gunderson, president of Gunderson Capital Management, which holds Nvidia shares. "I believe maybe we're in the third, fourth inning of a nine-inning game here, with a lot still to come."
Barron's has previously written that Nvidia stock is worth holding unless Huang is forced out. There is no obvious successor to take over at Nvidia, with Huang having publicly dismissed the idea of succession planning and having an unusually wide range of direct reports under him.
"We think the odds favor an outsider being hired as CEO versus someone promoted from within, as we continue to believe no one internally has been prepped up for a transition," Baird's Gerra wrote.
The company's board said in a statement Sunday it has no reason to believe either the company's secrets or national security were compromised by Huang's affair.
Comments