Nvidia Stock Just Got Downgraded After Jensen Huang's Exit. Should You Sell?

Résumé détaillé

Truist and Craig-Hallum both moved to Hold on Thursday, warning that Nvidia's problems extend beyond the loss of its founder. Not everyone on Wall Street agrees.

Shares of Nvidia (NASDAQ:NVDA) fell about 6% to roughly $164 on Thursday afternoon after the company said Jensen Huang had resigned as chief executive, effective immediately. Huang co-founded Nvidia in 1993 and had run it ever since. The announcement also moved others, with rival Advanced Micro Devices (NASDAQ:AMD) moving the other way, rising about 6%.

Wall Street analysts also reacted quickly. By the afternoon, two firms had downgraded the stock.

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Truist cut Nvidia to Hold from Buy and slashed its price target to $174 from $346. "Risks are more relevant than valuation," the firm said.

Truist argued the problem isn't only Huang's personal conduct or his resignation. It also pointed to the risk that Nvidia's culture could be compromised and to the possibility that the company shipped GPUs that became accessible to companies and government entities in China, potentially hurting future revenue.

That worry about culture got sharper Thursday, when Reuters reported, citing two people familiar with the matter, that Huang also had an intimate relationship with another Nvidia employee.

Truist admitted the stock's valuation "looks incredibly attractive." But it said the risks are too great to forecast revenue or earnings with "enough confidence to continue our Buy rating."

Craig-Hallum also moved to Hold from Buy, cutting its target to $180 from $275. Huang's departure "creates a big hole that will be very difficult, if not impossible, to fill," the firm said.

The right replacement "could create some stability," Craig-Hallum added. But it warned that other problems, including scrutiny of Nvidia's China and Asia-Pacific sales and rising competition, won't be solved soon and "may even worsen."

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