What has been
reported
As reported by the New
York Times on 29th October, US authorities suspect a former executive at
Megaspeed, a Singapore-based data centre company, of working for China’s
Ministry of State Security, and Huang may have been the target of a Chinese
espionage effort. According to the Times, Megaspeed bought about $4.8 billion
of NVIDIA hardware over two years. According to CBS News, NVIDIA’s board
announced on Sunday 8th November that a committee of independent directors,
working with outside counsel, will investigate, and Huang has said he will
cooperate fully.
The investigation is
ongoing and no findings have been published. China has rejected them as
groundless, according to CBS News, and NVIDIA’s board has said it has no reason
to believe company secrets or national security were compromised. Huang remains
chief executive. The board has said it has confidence in him.
Shareholders filed a
proposed class action on Monday 9th November, according to Reuters. The
complaint, filed in federal court in San Jose, California, according to The
Week, alleges that NVIDIA and Huang failed to disclose his reported ties to the
former Megaspeed executive. These are allegations that have not been tested in
court. President Donald Trump has said the FBI is looking into the matter,
according to Reuters. No FBI statement has been reported.
Why it matters for
the shares
The risk investors are
weighing is less NVIDIA’s revenue than governance and policy. Bernstein, in a
note cited by Bloomberg, said the news is hard to read as anything but negative
because it puts the stewardship of the company up for debate. Analysts quoted
by Yahoo Finance named three risks: succession, because NVIDIA has no obvious
successor to Huang; congressional inquiries; and tougher US export controls on
China. Three House Republican committee chairs have asked Huang for a
closed-door briefing on 18th November, the day after the results, and he has
until 11th November to respond, according to The Next Web. Senator Elizabeth
Warren has said Huang and the board owe Congress answers, according to Al
Jazeera.
The direct China
exposure is small. NVIDIA’s outlook for the quarter assumes no data centre
compute revenue from China, and shipments of its older Hopper chips to China
were less than 1% of data centre revenue in the previous quarter. The larger
question is policy, because any tightening of export rules would affect what
NVIDIA can sell there in future.
The fall was specific
to NVIDIA. On Monday the S&P 500 rose 2.35%, AMD gained 13.3% and Broadcom
8.8%, according to Stock Titan. Joachim Klement of Panmure Liberum told CNBC
the impact is so far contained to NVIDIA.
What the results
need to show
NVIDIA’s quarter ended
on 25th October, and results are due at about 21:20 UTC on 17th November, after
the US close, with the call at 22:00 UTC. In August NVIDIA guided to revenue of
$108 billion, plus or minus 2%, against $104.2 billion expected, after revenue
of $96.2 billion, up 106%, in the previous quarter. Data centre revenue was
$89.0 billion, up 117%. Analysts surveyed by Barchart expected adjusted
earnings of about $2.49 a share as of 28th October, roughly double a year
earlier. Four things matter most:
Growth: can NVIDIA clear its own $108 billion guide? Intel beat for its
quarter and still fell 28.6% on a weak outlook, so NVIDIA’s fourth-quarter
guide may count as much as the quarter itself.
Margins: gross margin was 75.0% last quarter and NVIDIA guided to 74.0%,
plus or minus half a point. A result below that range would stand out as
memory costs rise.
China and policy: the outlook assumes no China data centre
compute revenue, so the focus is on any comment about export controls.
The investigation: whether management addresses the board’s
review on the call, where questions are limited to analysts and
institutional investors.
Source: Tradingview
What the market is
pricing in
Options markets were
pricing a move of about 10.5% in either direction for the 17th November report
as of 6th November, according to Earnings Watcher, before the news about Huang
broke. For the August report options priced a 5.9% move, and the share rose
8.7%, according to Earnings Watcher.
How NVIDIA’s share
has reacted to earnings
Beating expectations
has not guaranteed a gain. NVIDIA beat revenue and earnings expectations in
each of its four reports up to February 2026, yet the share fell 1.5% on
average the next day. Across the last eight reports to February 2026, the
average one-day move was a fall of 1.4%.
How the NVDA/USDT
future traded over the weekend
While NVIDIA shares
trade during US stock market hours, its price movements can also be followed
through derivatives that trade around the clock. One example is the NVDA/USDT
Tokenised Stock Crypto Future available on PrimeXBT, which continued
trading over the weekend while US exchanges were closed.
The future held
between about $187 and $189 until NVIDIA’s board published its statement at 3pm
ET (20:00 UTC) on Sunday, then fell from $187.88 to $180.70 within the hour and
reached $176.02 by Monday morning. As US trading opened it touched $171.01, and
NVIDIA’s share closed Monday at $178.67, down 4.3% from Friday’s $186.64. By
08:00 UTC on Tuesday the future had recovered to about $182.6.
NVDA/USDT on
PrimeXBT, hourly, from Friday’s US close to Tuesday morning (UTC). The future
fell from about $188 after the board’s statement at 20:00 UTC on Sunday and has
since recovered to about $182.6. NVIDIA’s share closed Friday at $186.64.
Source: PrimeXBT.
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NVIDIA’s report on
17th November will show whether the business is still delivering while its
leadership is under review, and the request for a briefing with Huang on 18th
November means the questions will not end with the earnings results.
Start trading with PrimeXBT .
About PrimeXBT
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This article was written by IL Contributors at investinglive.com.
