Nvidia rebounds 5% in premarket after two-day slide on Huang scrutiny
Nvidia shares rose 5.3% in premarket trading on Wednesday after falling for two days amid scrutiny of CEO Jensen Huang. The company hired Wachtell Lipton to investigate the matter.
A rebound after two days of falls
Nvidia shares rose 5.3% in premarket trading on Wednesday, as of 5:47 a.m. ET, after falling for two days amid scrutiny of Chief Executive Jensen Huang. The stock closed Tuesday at $168.89, down $9.78, or 5.47%, after a 4.3% fall on Monday.
More details were revealed Tuesday about the impact of Huang's alleged affair with an alleged Chinese spy, and that drove Tuesday's fall, CNBC reported. Huang returned to the office on Monday and was also in the office on Tuesday conducting meetings, in an attempt to project business as usual, according to people familiar with the matter cited by CNBC.
- Shares in premarket tradingup 5.3% as of 5:47 a.m. ET
- Tuesday close$168.89, down 5.47% ($9.78)
- Monday movedown 4.3%
- Quarterly earningsdue November 17
Nvidia hires a law firm to investigate
On Tuesday, Nvidia announced it had hired law firm Wachtell, Lipton, Rosen & Katz to investigate whether company secrets or national security were compromised. Investors are assessing whether the matter will have damaging spillover effects on the business, CNBC wrote.
Bank of America, in a Tuesday note, laid out three scenarios with differing investment outcomes: the impact is contained, with leadership continuity; prolonged uncertainty pressures valuation before earnings; and an escalated outcome involving adverse findings, leadership disruption or tighter restrictions that would require earnings reassessment. A separate BofA note suggested the impact on Nvidia's business could be limited, which buoyed investors.
Morgan Stanley drops its top-pick status
Morgan Stanley removed Nvidia as a top pick after two days of market losses, saying the bank was "no longer as confident" Nvidia can continue to outperform. The bank did not state a downgrade was imminent, and CNBC clarified that losing top-pick status is not the same as a downgrade.
Zacks Chief Equity Strategist John Blank said the selloff reflected two concerns: that the U.S. might impose further restrictions after the affair, and that further problems might arise as the news develops. Nvidia reports quarterly earnings on November 17.
This post summarizes reported facts and our view of the risks involved. It is not a forecast and not investment advice.
