Nvidia shares fell 5.5% on Tuesday following a hot inflation report and an ongoing board investigation into CEO Jensen Huang, dragging down broader market sentiment as investors weigh potential Federal Reserve rate hikes.
Investor anxiety hit tech holdings hard as October consumer prices rose 0.4% against the 0.3% expected, while core prices climbed 0.3% against 0.2% anticipated by Trefis.
The 10-year Treasury yield climbed to 4.98%, and Federal Reserve Governor Christopher Waller indicated a leaning toward a December hike, leaving the door open to a half-point move. Because growth stocks like Nvidia are priced on future profits, higher rates make those future earnings worth less today, according to Trefis.
Compounding the macroeconomic pressure, Nvidia closed Wednesday at $173.73, sitting 27% below its 52-week high and 24% lower than a month prior, as Trefis reported. Much of Tuesday’s sharp drop stemmed from internal developments rather than inflation alone, as the board investigated Chief Executive Officer Jensen Huang. By Wednesday evening, The Wall Street Journal reported that the board was preparing to oust him.
Jensen Huang resigned as Chief Executive Officer effective immediately following a scandal involving an alleged spy, the company’s board of directors announced on Thursday, according to CBS News. The decision followed an investigation into Huang’s affair with a woman that United States intelligence agencies suspect was spying for China, CBS News noted.
“The problem now is that there's no replacement for Jensen. It's a black eye moment for him, for Nvidia, and actually the U.S. tech industry. I'd say it's dark day for, you know, U.S. technology,” Dan Ives, partner and senior managing director at Yorkville Ives & Co., told CBS News.
“With him out as CEO, China could significantly narrow the gap versus the U.S.,” Dan Ives, partner and senior managing director at Yorkville Ives & Co., told CBS News.
The board’s action followed a New York Times report stating that five employees at Nvidia came forward alleging Huang was romantically involved with Kimberly Powell, Nvidia’s vice president of healthcare, CBS News reported. Following Huang’s resignation, the Reuters news agency reported that Huang also had an intimate relationship with a second employee, identified only as a woman, according to two people familiar with the matter.
Alice Huang, also known as Huang Le, was an executive at Megaspeed International, a Singapore-based data center company whose website touts its partnership with Nvidia, CBS News reported. The board named Harvey Jones as the company’s first board chair.
“The Board has full confidence in Colette and the leadership team, and we expect the company’s operations, customer commitments and product roadmap to continue without interruption,” said Harvey Jones, board chair.
Colette Kress has served as Nvidia’s Chief Financial Officer since joining the company in 2013, as CBS News detailed.
“With our leadership team, I am committed to building on the extraordinary foundation Jensen created over the last 33 years,” said Colette Kress.
The board said that it will conduct a search for a permanent chief executive officer, considering both internal and external candidates. Meanwhile, analysts at Trefis said that historical data across 37 Federal Reserve rate hikes from 2004 to 2023 shows Nvidia’s typical worst fall in the following year is 12%, though sharper declines occurred after initial rate hikes in past cycles.
Earlier coverage: Asian Stocks to Rally on US Tech Surge, Oil Slump: Markets Wrap
Keep reading
Discover more from Archyworldys
Subscribe to get the latest posts sent to your email.