Nvidia NVDA shares edged higher in premarket trading on Friday, recovering slightly after a sharp selloff tied to the abrupt resignation of longtime CEO Jensen Huang.
The stock was up 2% ahead of the opening bell after closing Thursday at $166.19, down 4.3%.
That followed deeper losses earlier in the week as the leadership crisis intensified.
Trading has been volatile, with the stock hitting lows near $149 in the previous session before recovering.
Investors have been rattled by uncertainty over succession and the broader implications for Nvidia’s dominant position in artificial intelligence chips.
Colette Kress, the company’s former finance chief, has taken over as interim CEO while the board searches for a permanent replacement.
The premarket bounce suggests some dip-buying after the heavy selling, although shares remain well below recent highs.
The broader market was also in green in futures trading, with technology stocks continuing to reflect caution around the AI sector.
Opinions divided over Nvidia’s short-term recovery
Wall Street analysts have responded with caution, with several warning that the leadership turmoil could weigh on the stock even as Nvidia’s underlying business remains strong.
“Nvida’s competitive advantage and customers don’t disappear overnight,” Seth Hickle, chief investment officer at Mindset Wealth Management, told Reuters.
“The market is trying to determine whether this is a temporary leadership crisis or something that fundamentally changes the AI investment thesis.”
Hickle said implied volatility would likely remain elevated until Nvidia’s earnings report and subsequent conference call provide more clarity about the company’s plans following the leadership change.
Lior Prosor, managing partner at deep-tech venture capital and private equity fund Deep33, also expects continued uncertainty in the near term.
“In the short term, we expect the market to remain jittery. Investors will want clarity on permanent leadership and several quarters of evidence that NVIDIA continues to execute against its roadmap and delivery expectations,” Prosor told Yahoo Finance.
“Until then, even if the stock looks increasingly cheap on fundamentals, it may take time before buying that discount becomes an easy trade.”
Ryan Zurrer, founder and director of investment firm Dialectic, sees the selloff differently and considers the lower valuation an opportunity.
“You’re buying this thing at 10 times forward-looking earnings for a company that, for all intents and purposes, seems irreplicable in the global AI infrastructure base,” Zurrer was quoted as saying by Yahoo Finance.
Analysts downgrade Nvidia
Several analysts have either downgraded Nvidia shares or reduced their price targets following the latest developments.
Bernstein analyst Stacy Rasgon cut his price target from $400 and downgraded the stock from Market Outperform.
However, he maintained that the company’s underlying business remained strong despite the leadership turmoil.
“Fundamentals of the business (if not the leadership) are clearly still intact with numbers that remain massive (and probably still headed higher). We don’t think the company should have huge issues operating while engaged in a search for new leadership. And (of course) the shares are almost absurdly cheap (and getting cheaper as we speak); clearly there is a lot of bad news getting priced in here,” he said.
He nevertheless cautioned against making a large investment in the stock at this stage.
“On the other hand, we find it hard to advocate stepping in here in size as there will no doubt be more allegations to come,” he said.
William Blair’s Sebastien Naji downgraded Nvidia to Market Perform from Outperform, citing concerns about the potential impact of the controversy on the company’s shares.
Naji believes the developments could remain a significant overhang on Nvidia stock in the near term.
“Meanwhile, the potential for a slower AI buildout and more intense competition from other chipmakers will only add to execution risk…governance and regulatory pressure, the potential for more serious fallout, and a sudden change in management are likely to muddle both execution and sentiment,” he said.
Oppenheimer analyst Rick Schafer also downgraded Nvidia to Perform from Outperform.
“While we see upside to the F3Q (Oct.) print and F4Q (Jan.) outlook, we expect fundamentals to take a backseat near term. The departure of Mr. Huang could, in our view, translate to a lingering share overhang,” Schafer said.
Despite the downgrades and price target reductions, analysts continue to highlight Nvidia’s strong AI product pipeline and long-term demand as supporting factors, even as they flag near-term governance and succession concerns.
Allegations keep coming
Alice Huang, an executive at Singapore-based Megaspeed whom US authorities have suspected of links to Chinese intelligence, was reported to have connections with China’s Huawei, which has been blacklisted due to security concerns.
Jensen Huang was reportedly involved in a romantic relationship with the suspected Chinese agent.
Additional reports have emerged of a second relationship with Kimberly Powell, Nvidia’s vice president of healthcare, who reported to Huang.
On Thursday, Reuters reported that Huang had an intimate relationship with yet another Nvidia employee, citing people familiar with the situation.
Huang will be testifying before Congress ahead of the Thanksgiving holiday.
Nvidia is scheduled to report fiscal third-quarter earnings on 17 November, having previously forecast revenue of approximately $108 billion.
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