Jensen Huang’s worth to Nvidia’s stock — what investors need to know
Nvidia founder and CEO Jensen Huang’s future as head of one of the most important names in technology hangs in the balance following revelations that he had an affair with a woman who U.S. intelligence agencies say is a Chinese spy. Analysts said his ouster could lead to a 20%-plus decline in the shares with the uncertainty that would follow overhanging the stock a bit longer after that. On Wednesday afternoon, The New York Times reported that Huang is also said to have had a relationship with an executive at Nvidia who reported to him, casting a further shadow over his leadership of the company. Minutes after that news broke, The Wall Street Journal reported that Nvidia’s board is preparing to remove Huang . Huang issued an apology on Sunday after The New York Times reported that he had an extramarital relationship with a woman intelligence agencies identified as a spy . Nvidia shares fell nearly 10% over the first two trading days of the week before rebounding in Wednesday’s regular session. Shares were last down 8% in extended trading following the Journal’s report that the CEO’s future at Nvidia may be in jeopardy. NVDA 5D mountain Nvidia in the past five trading days If Huang has to leave the company, Nvidia stock could take a major hit, Wall Street analysts and investors told CNBC. “When you have a founder-led company, and there’s no clear number two, that is a recipe for a 20% correction,” Gene Munster, managing partner at Deepwater Asset Management, said. Jay Goldberg at Seaport Research Partners also said that the stock could see a 20% hit following a sudden departure of Huang, but he suggested it could fall a lot more due to the CEO’s managerial centrality at the company. “If he gets fired tomorrow, or whatever happens to him tomorrow, the stock is down 20%,” he said. “But that’s just the near-term impact – the shock value. He’s built this company. He founded it. He’s grown it to where it is. He’s the only CEO the company’s ever had, and he structured the company in such a way [that] he is at the center of everything. He has 70 direct reports.” Dented valuation Matt Bryson at Wedbush made a comparison on Nvidia’s valuation to that of wafer maker TSMC, which supplies many of Nvidia’s core components. “If you look at Taiwan Semi … At the beginning of the day, it was trading at 15 times next year’s numbers [earnings], and I think Nvidia was closer to 10. So, I mean, you could make an argument there that that delta is largely, or at least in part attributable to concerns around his [Huang’s] future,” he said. Huang’s scandal wouldn’t be the first time that a company’s stock took a hit as a result of reported marital affairs or espionage claims involving a CEO. Many different companies have taken a hit on similar news, according to research from Mizuho. Despite the risks to the stock, analysts said that Nvidia is still solidly positioned to continue its operations in the event that Huang has to step down. “Can it be managed forward? That’s the real question. I think it can, because Jensen has instilled, has set the company up to succeed. He set the pace, set the tone, and established such deep, entrenched relationships and agreements within the industry that if he left, I don’t think anything would change at Nvidia for at least the next couple years,” said Cody Acree, an analyst at StoneX. Gil Luria of D.A. Davidson said there may not be any substantive long-term effect on the company provided there’s a solid transition plan in place for Huang. “If he has to leave … if there’s good succession and an orderly transition, I don’t think there’s going to be any impact to the company,” he said. – Paulina Likos contributed reporting
