Analysts call it 'a dark day for Nvidia' as six downgrade the stock
Six Wall Street analysts downgraded Nvidia between Wednesday night and Thursday morning, with Bernstein cutting its target in half, as Jensen Huang's resignation shook the AI leader.
Six downgrades in one night
6 Wall Street analysts downgraded Nvidia between Wednesday night and Thursday morning, CNBC counted, as the board met to decide the fate of founder Jensen Huang and then accepted his resignation. The stock was already down 7% so far this week, after falling 4.3% on Monday and 5.5% on Tuesday, and it fell 6.3% in premarket trading on Thursday.
Several analysts told CNBC the stock could fall 20% if Huang were removed as chief executive, given how central he has been to Nvidia's success. Huang, who led the company for 33 years since its founding in 1993, resigned as president, chief executive and board member, and chief financial officer Colette Kress was named interim chief executive, Reuters reported.
Who moved, and how far
Ben Reitzes of Melius Research, a longtime Nvidia bull, cut his rating to hold from buy, setting his target at $185. Mark Lipacis of Evercore ISI downgraded Nvidia to in line from outperform, Sebastien Naji of William Blair cut it to market perform from outperform, Rick Schafer of Oppenheimer cut it to perform from outperform, and John Vinh of KeyBanc cut it from overweight.
Bernstein went further. Stacy Rasgon, a senior analyst at Bernstein, cut its target on the stock by half, to $200 from $400, telling CNBC's Squawk Box Asia that Huang's alleged affair with a direct report makes it "much tougher for the board to leave him in position." The New York Times reported on Wednesday that Huang had engaged in a second extramarital affair, this time with an employee.
- Analyst downgrades6 in one night
- Bernstein target$400 to $200
- Ives value with Jensen$300 per share
- Ives value without Jensen$225 per share
- Nvidia Thursday afternoon$165.42, down 4.78%
The $300 versus $225 question
Dan Ives, one of Wall Street's best-known technology bulls, called the developments "a dark day for Nvidia," while arguing the board had to act. "We believe Nvidia's value is $300 per share with Jensen as CEO and $225 per share without Jensen as CEO," Ives said in a note, putting a $75 gap on the founder himself.
The market moved fast on the news. Nvidia shares plunged more than 13% after the resignation was announced, before paring losses to trade at $165.42, down 4.78%, on Thursday afternoon, according to CNBC. Reuters reported that Huang, the company's fourth-largest investor with a stake of about 3.61%, will exit the board as well, and that the company had never identified a successor.
What to watch next
The next test comes on November 17, when Nvidia releases quarterly results as scheduled. Investors will watch whether Kress, who built the company's capital strategy over 13 years as chief financial officer, can steady the story, and whether the analysts who rushed to downgrade start to reverse course.
The board's search for a permanent chief executive is now the central question for a $4.2 trillion company whose chips power the world's most advanced supercomputers and AI data centers. The downgrades put a number on what Wall Street thinks the founder was worth. The earnings report will show whether the business underneath still earns it.
