Nvidia shares fell about 6% to around $164 on Thursday afternoon after co-founder Jensen Huang stepped down as CEO with immediate effect. Rival AMD rose about 6%. Truist and Craig-Hallum both downgraded Nvidia from Buy to Hold, as attention shifted from valuation and AI demand to leadership succession, China-related business and corporate governance uncertainties.
Truist and Craig-Hallum cut ratings and price targets
Truist lowered its price target on Nvidia to $174 from $346. The firm said the key concerns were not limited to valuation: Huang’s departure could affect the company’s culture and execution, while questions about whether Nvidia GPUs had reached Chinese companies or government bodies could carry implications for future revenue. Those issues may draw scrutiny, but remain uncertain.
Truist said Nvidia’s valuation looked attractive by its assessment, but it no longer had enough confidence in forecasting the company’s revenue and earnings to maintain a Buy rating. Reports alleging a close personal relationship between Huang and another Nvidia employee have also brought governance and workplace culture into focus. The allegation is not confirmation by the company that such a relationship existed.
Craig-Hallum also downgraded Nvidia to Hold from Buy and cut its price target to $180 from $275. The firm said Huang’s departure leaves a difficult-to-fill gap at the top of the company. A suitable successor could provide some stability, but scrutiny of sales in China and the wider Asia-Pacific region, along with intensifying competition, may persist in the near term or increase. Nvidia has previously noted in its annual report its heavy reliance on a long-serving management team.
Interim CEO Colette Kress faces succession questions
Not all analysts turned cautious. DA Davidson lowered its price target to $200 from $300 but kept a Buy rating. The firm expects Nvidia’s product lead to continue, while warning that Huang’s departure could weaken the company’s ability to coordinate the broader AI industry. Its new target is still about 22% above Thursday’s share price, but represents the firm’s assessment, not a guarantee of future performance.
Nvidia’s board said it expects no disruption to operations, customer commitments or the product roadmap. Chief Financial Officer Colette Kress will serve as interim CEO. She has been Nvidia’s CFO since 2013 and previously spent nearly 25 years in finance roles at Cisco and Microsoft. DA Davidson said she could take on the interim leadership role. Investors will be watching for a permanent succession plan and any effect the transition may have on execution.
Huang’s Nvidia stake is worth about $133 billion
Investors are also monitoring Huang’s Nvidia holdings. His most recent insider filing showed that he held about 811.5 million shares as of September, worth roughly $133 billion at the current share price. Nvidia has not said what Huang plans to do with the stake. The company’s proxy filing shows that it has no severance agreements with its executives.
A large sale of those shares could add supply pressure to the stock, but no sale plan has been disclosed. Any actual effect would depend on Huang’s decisions and the size of any transactions; the value of his holdings alone does not mean a sale will take place.
Quarterly results will test Nvidia’s revenue guidance
Nvidia’s next key update is its quarterly earnings report on Tuesday. Management forecast revenue of about $108 billion for the period when it reported results last quarter. Investors will look for any change to that outlook and for Kress’s comments on China business, the CEO succession and the product roadmap.
Demand for AI chips remains an important support for Nvidia’s business, but the leadership change and questions around China sales add uncertainty to forecasts for the coming quarters. The company’s revenue guidance, reported results and management’s responses will provide further information on those issues.