- Jensen Huang's affair with a suspected Chinese spy has roiled Nvidia's stock in recent days.
- Baird issued a rare downgrade for Nvidia on Wednesday, citing Huang as a key factor.
- Morgan Stanley removed Nvidia from its list of top stock picks, though its analysts remain bullish.
Jensen Huang's affair has roiled Nvidia stock in recent days, and some analysts on Wall Street are starting to recalibrate their views in light of the scandal.
Nvidia shares rallied on Wednesday after two days of losses stemming from news of Huang's relationship with a Chinese national suspected of being a spy.
Analysts at Baird published a note issuing a rare downgrade, citing Huang's affair as a reason to doubt the outlook for the company and the stock.
The firm downgraded Nvidia to Neutral from Buy, highlighting the controversy surrounding Huang's relationship with Alice Huang, an executive who has been employed by Singaporean data center firm Megaspeed.
"Downgrading to Neutral until uncertainties regarding U.S. government action likely resulting from the upcoming congressional hearing are lifted, U.S. government investigations reach their conclusions, revenue impact from risk channel near-term adjustments along with potential charges is quantified, and uncertainties around CEO tenure clear," Baird's Tristan Gerra wrote.
The analyst slashed his price target for the stock from $500 to $200. Nvidia shares were trading as high as $176.27 on Wednesday.
In Baird's view, the US government could respond by tightening export controls on advanced AI chips due to concerns about the "Southeast Asia data center loophole," the idea that tech companies in China are able to access restricted Nvidia GPUs through business with companies in places like Singapore and Malaysia.
"We believe low-level shipping is taking place into Asia-based warehouses with some inventories awaiting China demand," stated Gerra. "We estimate this could translate into a $5B write down."
Baird isn't the only firm that's scaled back its rosy view of Nvidia in response to the scandal now surrounding its CEO. Morgan Stanley analyst Joseph Moore removed the chipmaker from the bank's list of top stock picks, though he maintained an Overweight rating and a bullish $300 price target.
Moore said that Nvidia stock has fallen 25% since its addition to the list on October 2, though his team still sees the AI buildout as strong and durable.
"We do acknowledge that the near term uncertainty will remain, as CEO Jensen Huang's leadership is crucial to the company's strategic direction in our view," he said.
Even one of Wall Street's biggest bulls has acknowledged that the Huang controversy stands to negatively impact Nvidia stock if the situation deteriorates. Dan Ives of Yorkville Ives, a tech and AI mega-bull, said on Tuesday that Huang's departure from Nvidia would result in a 30% reduction in the company's value.
"Jensen is the core DNA of Nvidia and its AI success and ambitions are heavily tied to him staying on as CEO. Jensen is not replaceable," Ives said. "There is no other person on the management team bench that can step in seamlessly as CEO."
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