Analysts weigh in on Nvidia’s future

Nvidia investors were on tenterhooks Thursday morning amid reports that the chip giant’s board had convened to discuss CEO Jensen Huang‘s future with the company.

The New York Times on Wednesday reported that Huang had engaged in a second extramarital affair with an employee. The CEO was already under scrutiny after Huang admitted to having a romantic relationship with a woman U.S. intelligence believes is a Chinese spy.

Nvidia is yet to make a public statement about Huang’s future with the company. However, CNBC confirmed late on Wednesday that the board was meeting to decide whether or not to oust him after more than 30 years at Nvidia’s helm.

The company’s stock is down 7% so far this week, after tumbling 4.3% on Monday and 5.5% on Tuesday as Huang dominated headlines around the world. Shares rebounded 2.9% on Wednesday, but were last seen roughly 5.4% lower in premarket trading on Thursday.

Here’s what analysts are saying about the company and its shares.

“In our view the writing is on the wall that Jensen’s days at Nvidia could be numbered and we would expect this to be a very fluid situation over the next 48 hours,” renowned tech bull Ives said in a note overnight.

“Jensen has created a black eye moment for himself and Nvidia and now has created a spider web of complexity that Wall Street, Silicon Valley, DC, and the global tech ecosystem are trying to figure out what is next.”

“We believe Nvidia’s value is $300 per share with Jensen as CEO and $225 per share without Jensen as CEO,” Ives added.

“The stock will clearly be under pressure with this fluid news but the reality is its a dark day for Nvidia, but the company will navigate this turmoil and get through to the other side and remain a core foundational piece of the AI Revolution.”

Citi analysts said overnight that they had trimmed their target price for Nvidia to $225, down from $285.

“If Jensen were forced out, it would mark the end of an era,” Malik and Sylla said in their note.

“Under his leadership, Nvidia became the dominant force in AI infrastructure, the primary beneficiary of the global AI spending cycle, and one of the world’s most valuable companies. A leadership transition creates an overhang on the stock given his central role in strategy, product vision, customer relationships, and investor confidence.”

They said Nvidia Chief Financial Officer Colette Kress could serve as interim CEO while the board evaluates external candidates.

“As much as there is a lesson here for Nvidia around corporate governance, around key man risk… the reality is there is still 40,000 other employees at Nvidia, and there is some real talent there, and I have no doubt that there are some executors within Nvidia that the board will be able to tap to execute on their existing plans and continue to manage the company,” Thooft told CNBC’s “Squawk Box Asia” on Thursday.

“I think the bigger risk is the foresight in the next several years, where Nvidia was driven by a lot of the mindset and thoughts that come out of their CEO, and if he’s no longer there they’re going to have to find that replacement.”

“You can’t deny the board has done a horrible job of succession planning,” Greifeld told CNBC’s “Morning Call” on Thursday.

“What the board has to find out in the next days or weeks is, did Jensen lie to them? Right? Did he lie to them repeatedly on different topics? We don’t know. Does he lose their trust basically on lying to them over the years? I’m sure the board would love to keep Jensen in place in some role. Right, his value to the company is quite large.”

Greifeld said he does not see a premium in Nvidia stock, noting that it trades at a low multiple “so there’s no bubble to burst here with respect to the valuation.”

“If there’s a new CEO in, they don’t have to make any decisions day one, day 30, day 60. They have time to really get their footing and come up with their own strategic vision,” he told CNBC. “You’re not going to change what is in the development plan for chips that exists today. So I think certainly it would be a loss, but given the nature of the business and the long lead time for these chip developments and the long contractual relationships they have with customers, it would give them certainly room to maneuver.”

Reyle told CNBC’s “Squawk Box Asia” that Nvidia’s board had painted themselves into a corner by not having any kind of succession plan in place.

“I’ve heard him compared to Steve Jobs being removed from Apple, but [Jobs] put in place a succession plan and cultivated and groomed Tim Cook for years, so that when he passed away and [Cook] took over, there was a real leader there,” he said. “Right now, Nvidia doesn’t have that person in place, so it’s going to be a choice of keeping Jensen and being faced with … all kinds of interrogations, or they’re going to have to move on from him, and that’s just going to make the stock uninvestable. That doesn’t make the AI trade uninvestable, but it certainly makes Nvidia uninvestable.”

Reyle said he saw the stock moving “lower and much lower from here.”

“There’s no obvious [replacement] there that can step right in and take over, so they may kind of try to ride this out and retain him,” he said. “But there’s going to be a lot of difficulty in doing so because he’s going to become something of a liability.”

“NVIDIA upheaval puts tech concentration risks in focus,” Haefele and his team said on Thursday morning.

“Without taking any views on individual companies, the episode reinforces the importance of investment diversification and selectivity as the AI trade matures. We retain our conviction in AI’s long-term potential, with compute demand remaining robust and earnings resilient. But elevated expectations and potentially wide differences in company outcomes can leave concentrated portfolios exposed to company-specific setbacks.”

“Jensen Huang is toast,” Blain said in his morning newsletter. “Nvidia’s dependence on Jensen Huang is now exposed as a major market risk. The dominant firm within the AI industry lacks clear succession planning and Huang was seen as the acceptable face of AI by the public.”

“Confidence in the AI sector has been wobbling for months,” he added. “Huang’s departure could lead to instability and trigger another collapse.”