Artificial intelligence giant Nvidia is facing investor scrutiny due to concerns about the company’s future amid its internal investigation into CEO Jensen Huang’s affair with an alleged Chinese spy.
Huang admitted to being unfaithful to his wife in a statement on Sunday, in which he also said he had fallen short of his responsibilities to the company and said he would cooperate with the investigation.
Nvidia’s board of directors initiated an independent probe into the matter, saying that while it has no reason to believe national security or company secrets were compromised, the probe will examine all available information.
The controversy has prompted some firms to alter their assessments of the company’s shares, as Baird issued a rare downgrade of Nvidia stock – cutting the AI giant’s rating to “neutral” because of a lack of visibility into 2027 data center spending, possible demand softness and uncertainty over Huang’s tenure.
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Morgan Stanley also removed Nvidia from its Top Pick list, although the firm retained its “overweight” rating for the stock, which has experienced a price decline of over 25% since it received the designation last month.
“We do acknowledge that the near-term uncertainty will remain, as CEO Jensen Huang’s leadership is crucial to the company’s direction in our view,” Morgan Stanley analysts said in a note.
Bank of America Global Research also took Nvidia out of its U.S. 1 List, while at least three other brokerages – including Wells Fargo and Citigroup – reduced their price targets for the stock earlier this week.
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Nvidia shares have been caught in a broader tech selloff after the midterm elections showed Democrats winning majorities in both chambers of Congress, with the stock’s woes deepening amid the controversy.
In the first two trading sessions after Huang disclosed the affair and Nvidia’s board opened its inquiry, the company shed over $427 billion in market capitalization.
The stock has rebounded during Wednesday’s trading session, with shares up about 3.5% as of mid-afternoon.
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Despite investors questioning Nvidia’s outlook, the company remains one of the most favored stocks on Wall Street .
Nvidia carries a median price target of $314, according to LSEG data, which implies about 82% upside from its current levels, with 59 of 64 brokerages rating the shares as a “buy” or “strong buy.”
Reuters contributed to this report.
