"We're watching the circus from outside the tent": Bernstein lowered Nvidia's rating and price target

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. The decision was driven not by weak chip sales, but by uncertainty surrounding the future of CEO Jensen Huang, the bank’s analyst Stacey Rasgon explained on CNBC. Bernstein became the third major bank in two days to lose enthusiasm for Nvidia shares: on November 11, Morgan Stanley removed the stock from its list of top picks, and Baird stopped recommending it as a buy.

Nvidia's board of directors is looking for a replacement for Huang following reports of two extramarital affairs. The second affair—with a subordinate—makes the situation “much more complicated,” and it will be “much harder” for the board of directors to keep Huang in his position, Rasgon said. The analyst is waiting to see “if anything else comes to light.”

“I’ve had enough. Now we’ll watch the circus from outside the tent,” he concluded.

Rasgon did not revise his earnings expectations for Nvidia and lowered the price target solely based on the P/E ratio, according to investingLive. The new target price is 12.7 times the earnings per share that analysts on average expect for the fiscal year ending in January 2028, while the previous target price was 25.4 times that figure, the publication calculated. Thus, the bank attributes its decision to risks specific to Nvidia itself, rather than to a weakening of demand for AI, concludes investingLive.

Demand for Nvidia chips remains “very, very strong,” and customers are unlikely to cut back on purchases, Rasgon says. He admitted that it wasn’t easy for him to lower the rating: he understands the temptation to buy shares after a drop, since they are “absurdly cheap.” Nvidia’s stock price has fallen 15% since early November, dropping even below Bernstein’s new price target: as of 1:20 p.m. Astana time, the stock was trading on the Blue Ocean over-the-counter platform at around $162 per share.

Huang is the visionary around whom the entire company is built, and “Jensen Huang is Nvidia,” Rasgon is convinced. The company’s current dominance in the AI market is the result of decisions Huang made ten years ago, the analyst notes. “Who is the right person now to make decisions for the next ten years? I don’t know,” he admitted.

If Huang leaves, Rasgon isn’t worried about Nvidia’s day-to-day operations: he holds CFO Colette Kress and the operations team in high regard. But the company needs not so much a manager as a leader capable of looking years ahead, and it is “not clear” to the Bernstein analyst who that will be. “This gap will be difficult to fill,” he concluded.

This article was AI-translated and verified by a human editor