Six investment banks downgraded Nvidia's rating even before Huang stepped down. What's next?
The company's CEO, Jensen Huang, is considered a key figure whose resignation would severely harm the company
At least six analysts have already downgraded Nvidia's stock ratings / Photo: X/Nvidia
At least six analysts have already downgraded Nvidia’s stock ratings due to the scandal surrounding the company’s CEO, Jensen Huang. He has resigned. Even before the announcement of the CEO’s departure, Oppenheimer warned of the risk of a “brain drain” that the company would face in this scenario. Nvidia’s stock fell more than 11% in premarket trading.
Details
Oppenheimer downgraded its rating on Nvidia shares from "Outperform" (meaning "better than the market," which implies a buy recommendation) to "Perform" (meaning "in line with the market," which corresponds to a hold recommendation) and withdrew its price target, according to Investing.
According to analysts, Huang has no obvious successor. Furthermore, his departure could trigger a “brain drain” from the AI giant and jeopardize Nvidia’s pace of innovation. Huang’s role as a leading figure in the AI industry cannot be overstated, and his departure would be a major event capable of altering Nvidia’s investment appeal, according to Oppenheimer.
Nvidia will release its quarterly earnings report on Tuesday, November 17. Oppenheimer believes that the third-quarter results and fourth-quarter outlook may exceed expectations. However, in the near term, analysts believe that fundamental metrics will take a back seat.
According to analysts, AMD, Marvell Technology, and Broadcom could benefit from the turmoil at Nvidia.
Who else lowered the rating?
— William Blair downgraded Nvidia’s stock rating from “Outperform” to “Market Perform.” Huang’s departure and the intense scrutiny the company is facing will put significant pressure on Nvidia’s stock in the near term, according to William Blair analyst Sebastian Naji. His opinion is cited by Investing. The situation could be exacerbated by a slowdown in the development of AI infrastructure and increased competition from other chipmakers, the investment firm added.
— KeyBanc Capital Markets has downgraded Nvidia’s stock rating from “Overweight” to “Sector Weight,” according to Bloomberg. “Huang’s resignation implies a significant increase in strategic, organizational, and executive risks, which warrant a higher risk premium and lower valuation multiples for the stock,” noted analyst John Win. According to him, Nvidia’s business fundamentals “should remain strong for the foreseeable future,” but it will be difficult for the company to find a successor with the same leadership and strategic vision as Huang.
— Ben Raitzes of Melius Research downgraded the stock from “Buy” to “Hold” and lowered the price target from $315 to $185. The company can do little at this point to prepare for long-term challenges, including potential caution among corporate and government customers regarding investments in the Nvidia ecosystem, and non-cloud services may reduce capital expenditures to “weather the storm,” the analyst believes. Investors, meanwhile, may prefer AMD or Broadcom shares, he added.
— Evercore ISI downgraded its rating from “Outperform” to “In Line” and lowered its price target to $186. Following Huang’s resignation, Nvidia faces a lengthy process of finding a new CEO, which will leave the company in limbo, warned analyst Mark Lipakis. He believes that the estimated value of Nvidia’s shares “will continue to decline.”
— Baird analyst Tristan Guerra was the first to downgrade Nvidia’s stock rating to “Neutral” after the scandal broke, and lowered the price target from $500 to $200. The new target price still implies a 15% increase from the opening price on November 11.
— On November 12, Bernstein downgraded Nvidia’s stock rating from “Outperform” to “Market Perform” and cut its price target in half—from $400 to $200.
This article was AI-translated and verified by a human editor
