Nvidia stock plunged in the extended hours after reports that the company’s board of directors was meeting and planning to oust Jensen Huang. NVDA erased the gains it made in the regular session and dropped to a low of $158, its lowest level in months. It has now plunged into a bear market after falling by 34% from its highest point this year.
Nvidia board is planning to remove Jensen Huang
According to the Wall Street Journal, Nvidia’s board of directors is planning to remove Jensen Huang as Chief Executive, marking one of the biggest downfalls in corporate history.
The move comes after Huang admitted to infidelity, including to Alice Huang, a Chinese national who is believed to be a spy. Most importantly, the WSJ reports that Huang was also in another affair with an employee.
It is possible for a board to remove a company’s founder from its leadership, especially when they don’t have a majority shareholding. In this case, Huang owns less than 10% of the company, which is currently valued at $145 billion. According to Bloomberg, Huang’s net worth has slumped by over $23 billion year-over-year.
Huang admitted to having an affair in a note to employees on Sunday. This note came a few weeks after the New York Times reported that he was seeing Alice Huang, an employee of Megaspeed, a Singapore-based company.
Huang’s removal presents a major risk
The potential removal of Jensen Huang as the CEO presents a major risk for Nvidia. For one, Huang has been in the industry for over three decades and is seen as a visionary leader.
Most importantly, it presents a major risk because the company has not been doing any succession planning. As such, it is unclear who will become the CEO if he departs and whether he will be as effective as Huang.
Also, the allegations could open the company to further investigations now that Democrats have won the midterm elections. One area they will look at is whether Nvidia has been selling its chips to China. In a report released in May, Culper Research estimated that about 20% of the company’s sales were from China. In all its recent earnings reports, Nvidia has maintained that it made no money in China.
On the positive side, many companies have survived after the removal of their popular CEOs. A good example of this is Apple, which has become the biggest company in the world. Apple’s board of directors fired Steve Jobs in 1985 and then rehired him in 1997. Since then, the company thrived, including by launching the iPhone.
Looking ahead, Nvidia shares will be highly sensitive to the actions of the board. At the same time, it will be sensitive to next week’s earnings report, which will provide more hints about its operations. These results are expected to show that its revenue growth intensified, with Yahoo Finance estimating that it hit $108 billion.
Nvidia stock price technical analysis
NVDA stock chart | Source: TradingView
The daily chart shows that the NVDA stock price has been in a strong downward trend in the past few weeks. This sell-off intensified on Monday after Huang admitted to infidelity. After rebounding on Wednesday, the stock retreated to $158 in the extended hours after reports on his removal.
The stock has remained below all moving averages and is now below the key support level of $164, its lowest level in March. Therefore, there is a likelihood that it will drop further in the
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