Nvidia’s Selloff Ripples Down the ‘Circular Web’ of Companies It Backs as Board Weighs Huang’s Future
Nvidia ($NVDA) is down about 8% premarket to around $160 after The Wall Street Journal reported Wednesday evening that the board is preparing to oust CEO Jensen Huang. The board met late Wednesday, but as of this morning it hasn’t announced a decision, per Bloomberg’s live blog. At $160, the stock is down a third from its October 6 record close of $239.24, erasing Wednesday’s 2.9% bounce and then some.
Bloomberg reports the board is working with an outside firm on candidates and weighing an interim CEO, and, citing Semafor, that some directors favor CFO Colette Kress. Wall Street is stepping back: Baird, Bernstein, Oppenheimer and William Blair have all downgraded the stock this week, and Morgan Stanley dropped it as a top pick (Bloomberg).
The Selloff Is Hitting Nvidia’s Investees, Not Its Biggest Customers
A telling signal is who’s falling with Nvidia: the circular web of companies it funds that in turn buy its chips. All seven of Nvidia’s major public stakes, per its latest 13F filing, are lower premarket: CoreWeave ($CRWV) down 9.7%, Nebius ($NBIS) 9.2%, Coherent ($COHR) 4.9%, Intel ($INTC) 3.0%, Synopsys ($SNPS) 1.3%, Nokia ($NOK) 1.3% and SpaceX ($SPCX) 0.6%. Oracle ($ORCL), tied in through OpenAI’s Stargate project rather than an Nvidia stake, is off 2.8%.
Meanwhile, the hyperscalers that buy the bulk of Nvidia’s chips are flat: Amazon ($AMZN) +0.2%, Microsoft ($MSFT) −0.1%, Alphabet ($GOOGL) −0.2% and Meta ($META) −0.6%. Rivals Advanced Micro Devices ($AMD) and Broadcom ($AVGO) are higher, as investors bet they could pick up business (Bloomberg).
Two caveats: CoreWeave jumped nearly 25% Wednesday on strong results (more on that here), so it’s only giving back part of that gain, and Nebius reported third-quarter results this morning.
Washington and Megaspeed
The bigger long-term issue is national security. Huang has admitted an affair with Alice Huang (no relation), a former executive at Megaspeed, a Singapore-based Nvidia cloud partner, whom U.S. officials reportedly suspect of working for Chinese intelligence. Bloomberg’s analysis of trade records shows Megaspeed imported more than $4.6 billion of Nvidia products and brought in 50,000 more chips than Nvidia’s own audit found in its data centers. Overnight, Megaspeed said it had hired a U.S. law firm to count its GPUs and review its export compliance, and Bloomberg reports Alice Huang has resurfaced in Beijing.
On Capitol Hill, House China committee chair John Moolenaar and House Foreign Affairs chair Brian Mast say they’ll likely subpoena Huang if he doesn’t agree to a closed-door briefing. Sen. Kevin Cramer said Huang should resign, and Sens. Elizabeth Warren and Chris Coons have asked the administration to preserve all records on Nvidia chip exports. Bloomberg notes the scandal also complicates next week’s Trump-Xi summit in Shenzhen.
Strong Demand
Whatever happens with Huang, though, there remains fierce demand for Nvidia’s products. November 10, at $6.97 and $3.06 an hour. The B300 and H200 are hovering just below theirs, and the H100 is up roughly 50% from a year ago. That comes on top of CoreWeave saying this week it has 10x as much qualified demand as capacity through 2027, showing the market for Nvidia’s chips going into this was as tight as it’s been.
It also matters for the circular-financing worry: rental rates are what back the GPU-collateralized loans to the neoclouds, so firm prices mean that collateral is holding up for now at least.
What to Watch
A quick decision that names an insider such as Kress would signal continuity, but either way the stock is likely to stay under pressure without a successor who was groomed for the job.. ClearBridge’s Michael Feldman warned of a shift from “a Jensen premium to an execution discount” (Bloomberg). Nvidia will report third-quarter results on November 17, the day before Huang is due before House national security committees. For CoreWeave, Nebius and the rest of the companies Nvidia has backed, the question is whether Nvidia keeps writing checks under new leadership.
More on TheStreet Pro
- Rev Shark argues the bigger risk is the financing system Huang built, from the OpenAI commitments to the $500 billion customer-financing plan (Nvidia’s Problem Is Bigger Than Its CEO).
- Doug Kass on the “Central Bank of Nvidia” shifting from QE to QT and the Bessent-Lutnick clash over Megaspeed (More Tales From Nvidia: How Jensen Huang Does Anything Is How He Does Everything), and his first take Monday (Sex, Lies and Nvidia).
- Rev Shark on the initial drop (Political Trades Seem Obvious After Elections) and valuation (No Follow-Through, and Nvidia Gets Cheaper).
- Stephen Guilfoyle gives his take on the situation in Breaking Up With Nvidia and on CoreWeave’s results in CoreWeave Posts Embarrassment Even as Revenues Explode.
At the time of publication, in terms of securities mentioned, Sethi was long AMD, AMZN, GOOGL, META, MSFT, NVDA and ORCL.