Should You Buy or Sell Nvidia Stock Amid the Jensen Huang Scandal? Here Is What Wall Street Is Saying Now

SANTA CLARA, Calif. — Nvidia shares have lost nearly a tenth of their value in two trading days. Investors are trying to judge whether the scandal around CEO Jensen Huang is a buying opportunity or a warning sign for the world's most important artificial intelligence chipmaker.

Wall Street remains overwhelmingly bullish on Nvidia's business. However, analysts say uncertainty over Huang's future is likely to weigh on the stock until the company's board finishes its investigation.

Nvidia closed at $168.80 on Tuesday, down about 5.5%, after falling 4.27% on Monday. The stock had ended last week at $186.64. According to Bloomberg data cited in market reports, the shares are on a six-week losing streak, their longest since 2012, and trade about 29% below their Oct. 6 peak.

The selloff began after Huang sent an email to employees Sunday admitting to an extramarital affair. U.S. intelligence agencies have identified the woman, Alice Huang, an executive at cloud company Megaspeed, as someone who passed information to Beijing, according to reports by The New York Times and the Financial Times. Alice Huang is not related to the CEO.

"I was unfaithful to my wife. My actions hurt her and our children. There is no excuse for what I did. I am deeply sorry," Huang wrote. "Leading NVIDIA is the privilege of my life. My responsibility is to serve you and be worthy of your trust. I have fallen short of that responsibility."

Nvidia's board launched an independent investigation the same day. It said it had "no reason to believe that either national security or NVIDIA secrets were compromised," but gave no timeline.

The company said Huang would stay on. "Today's news will not slow NVIDIA. Jensen is committed to continuing to lead NVIDIA as CEO without interruption," Nvidia said in a statement.

The case for caution

Analysts say the biggest risk for shareholders is the possibility that Huang, who co-founded Nvidia in 1993 and has led it ever since, could be forced out.

"This is a black eye moment for Jensen and will spark multiple congressional inquiries at a minimum and will create an overhang on the stock for a myriad of reasons," Dan Ives, an analyst at Yorkville Ives, wrote in a research note.

"There is clearly risk that Jensen could be removed as CEO depending on the Board investigation, and this will add risk to the stock as he is so important to the Nvidia story and strategy globally," Ives added.

In a Tuesday note, Ives said the market was assigning roughly a 15% chance that Huang is removed and an 85% chance he stays as CEO. He estimated the investigation could take four to six weeks.

Corporate governance experts have also pointed to Nvidia's lack of a clear succession plan. Huang has dozens of direct reports, and the company has never publicly named an heir.

"Jensen is a very unique CEO. There is no known succession plan. There are no leaders in his company that would be the clear next to step up," Daniel Newman, CEO of the Futurum Group, told Bloomberg.

Some investors have said they would leave if Huang goes. Founder ETFs, which invests in founder-led companies, told Axios it would sell its Nvidia shares if Huang exits. "We don't really believe there is such thing as succession in these massive founder-led companies," the firm's Monaghan said.

Legal and political pressure is also building. A class-action shareholder lawsuit was filed against Nvidia and Huang in federal court in San Jose, California. The chairs of three House committees have invited Huang to a closed-door briefing on Nov. 18.

The case for buying

Despite the turmoil, nearly every analyst who covers Nvidia still recommends buying the stock. Bloomberg data shows 78 of 82 analysts rate it a buy, with an average price target of about $320, nearly double Tuesday's close.

Several firms trimmed their targets this week but kept bullish ratings:

• Wells Fargo cut its target to $300 from $315 and maintained an overweight rating.
• Citigroup lowered its target to $285 from $315 and kept a buy rating.
• Mizuho cut its target to $250, according to Investing.com data.
• Goldman Sachs maintained a buy rating and a $300 target.
• RBC Capital kept an outperform rating and a $330 target.
• Bernstein and Baird reiterated bullish ratings, with targets of $400 and $500.

The bull case rests on Nvidia's results. The company reported fiscal second-quarter revenue of about $96.2 billion, more than double a year earlier, and has forecast third-quarter revenue of $108 billion, plus or minus 2%. Nothing disclosed so far suggests demand for its AI chips has weakened.

Some investors are already buying. Cathie Wood's ARK Invest added 90,443 Nvidia shares during the selloff, betting the business will outlast the controversy.

After the decline, the stock's forward price-to-earnings ratio has fallen below 12, its lowest since 2013, according to Bloomberg data cited in market reports.

"Limited impact on NVIDIA by the Huang honeytrap story," Giuseppe Sette, co-founder and president of market research firm Reflexivity, wrote in an emailed statement.

Patrick Moorhead, CEO of Moor Insights & Strategy, told Yahoo Finance he does not expect Huang to be pushed out unless the board's investigation uncovers something more.

What to watch next

Two dates could shape the stock's direction. Nvidia is scheduled to report third-quarter results on Nov. 17, and analysts expect questions about Huang's status on the earnings call. Huang has been invited to appear before House lawmakers the next day.

Huang owns about 3.4% of Nvidia, according to FactSet. Unlike some tech founders, he does not have special voting shares that would protect him from removal by the board.

Bettors on the prediction market Polymarket put a 90% chance on the stock closing November above $140, and a 14% chance on it rebounding above $200.

For long-term investors, analysts say the decision largely comes down to two questions: whether Huang survives the board review, and whether Nvidia's AI business keeps growing at its current pace. Until the investigation ends, many on Wall Street expect the stock to stay volatile.

This article is for informational purposes only and does not constitute investment advice. Investors should consult a licensed financial adviser before making investment decisions.