Nvidia shares advanced 2.3% in premarket U.S. trading on Friday, offering a modest rebound for a stock that has been severely shaken by the resignation of former CEO Jensen Huang. The gain follows a sharp 4% decline on Thursday that, despite some dip-buying noted by analysts at CMC Markets, left the chipmaker with the better part of $1 trillion in market value erased this month alone.
The upheaval stems from revelations about Huang's personal conduct, including multiple extramarital affairs. According to Reuters, which cited two people familiar with the matter, Huang had an affair with an alleged Chinese spy and a separate intimate relationship with an employee. Huang was ousted from the helm of the company he co-founded in the early 1990s and built into an artificial intelligence powerhouse.
Colette Kress, most recently Nvidia's finance chief, has taken over as CEO on an interim basis. The company has also engaged an outside firm to conduct a search for potential successors to Huang, Bloomberg News reported. Nvidia is scheduled to report its latest quarterly results next week, a closely watched event that will provide the first financial glimpse into the company since the leadership change.
Analysts have been grappling with the implications of the controversy. Huang's departure raises questions about whether new leadership will maintain the same strategies, particularly the circular financing arrangements he championed. Under Huang, Nvidia not only supplied the chips powering AI systems but also acted as a sort of central bank backstopping its customers, a role that has been central to the company's growth and to the broader AI ecosystem.
Jonas Goltermann, Chief Markets Economist at Capital Economics, said in a research note:
News that Nvidia's CEO Jensen Huang is leaving the company adds to the ongoing uncertainty around the AI equity boom. While it seems improbable that the departure of one person will, by itself, trigger a deeper downturn in the tech sector, many of the ingredients for such a downturn already appear to be in place.
Even before the Nvidia crisis emerged, concerns had been swirling around the eventual returns from, and sustainability of, heavy spending on AI infrastructure like data centers and chips. The Nasdaq 100 futures contract sought direction on Friday, after the tech-heavy Nasdaq Composite fell by 0.39% in the prior session. Over the last one-month period, the index has fallen by more than 6%.
Still, signs of resilient AI demand have soothed some of the jitters around the industry. Strong outlooks from neocloud player CoreWeave and networking gear provider Cisco Systems have provided reassurance. For the week, the Nasdaq and the benchmark S&P 500 are on pace for their best performance since August.
Elsewhere, Nvidia rivals Advanced Micro Devices and Broadcom both dipped in premarket trading. The two gained more than 5% on Thursday, bolstered by wagers that the Nvidia ructions will allow them to carve out a greater chunk of the lucrative AI market.
The coming weeks will be critical for Nvidia as it navigates the leadership transition, addresses investor concerns about its strategy, and reports quarterly results that will be scrutinized for any signs of disruption from the controversy.