Nvidia shares fell while AMD, Broadcom and the broader chip sector rallied on Monday, as investors weighed a scandal around CEO Jensen Huang. Analysts say the rivals could also face greater scrutiny of their sales practices, and a Raymond James analyst points to proposed export limits on China.
Nvidia's rivals gained ground Monday as a scandal over Jensen Huang's affair with an alleged Chinese spy weighed on the chipmaker. Nvidia is probing whether Huang was targeted as part of a foreign-intelligence scheme, but said he will stay on as CEO and that business momentum won't slow down.
Shares of Nvidia declined more than 4%, adding to recent losses. The company shed $192 billion in market capitalization on Monday alone and $1.46 trillion across the past 24 trading days, a record for any U.S. company, according to Dow Jones Market Data.
Rivals and chip stocks rally
Meanwhile, Advanced Micro Devices and Broadcom were up 13.3% and 8.8%, respectively. Monday was Broadcom's best day since it announced a big deal with Alphabet last November, according to Dow Jones Market Data.
Other semiconductor stocks also rose, with the PHLX Semiconductor Index up 6.9%. Nvidia was the only stock in the index trading lower on the day.
Scrutiny may reach other chipmakers
AMD and Broadcom could also be subject to greater scrutiny over their sales practices, analysts say. Morningstar analyst Brian Colello told MarketWatch that all U.S. vendors and suppliers in the artificial-intelligence ecosystem will be under growing scrutiny in the coming months. Even so, he believes Nvidia is the main target: "Nvidia’s market dominance gives it the biggest bullseye", Colello said.
Seaport Research analyst Jay Goldberg told MarketWatch that companies like AMD and Broadcom likely will start adding honeypot training as a security measure. Broadcom and AMD did not immediately return requests for comment.
Washington weighs tighter export limits
Pressure on Nvidia may extend beyond its internal investigation. U.S. senators on both sides of the political aisle have called for an investigation, and a few House committees have asked Huang to brief them on his relationship with Alice Huang, a former executive at Singapore-based Megaspeed.
Raymond James analyst Ed Mills pointed to the MATCH Act, a bipartisan Senate proposal that would further limit sales of semiconductor manufacturing equipment to China. Sales to China accounted for 8% of Nvidia's revenue in the quarter that ended on July 26, down from 28% in the October quarter of 2022, according to Bernstein estimates.
Source: MarketWatch
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