Advanced Micro Devices shares fell on Friday as the chip sector sold off following Nvidia CEO Jensen Huang's resignation. AMD initially gained from the news, but investors now appear more worried about a broader industry risk.
Advanced Micro Devices stock was down 10.8% on Friday, Nov. 13, as the chip sector sold off amid the developing scandal at rival Nvidia. The S&P 500 and the Nasdaq Composite were down 0.8% and 1.3%, respectively.
Huang resignation unsettles chip investors
Nvidia CEO Jensen Huang resigned effective immediately on Thursday, after a second revelation of an extramarital affair, this time with a direct report within his former company. The first alleged affair was with a suspected Chinese spy who was reportedly instrumental in funneling at least $7.5 billion of Nvidia chips into China.
At first, the news helped AMD's stock on bets that customers would shift their AI chip orders to Nvidia rivals. On Friday, however, investors seemed more worried that the scandal could represent a more fundamental risk to the industry.
Profit-taking may add to the drop
AMD stock gained almost 50% in a week heading into Friday. Some of the decline is therefore probably profit-taking, as investors lock in gains.
Investigation has only begun
The Motley Fool's Johnny Rice thinks the effects of the Nvidia scandal may be longer lasting than many hope. The investigation has just begun, and things could get rocky if Congress or federal regulators find that Huang or any other Nvidia officers knew chips were being diverted to China in violation of export controls.
Source: The Motley Fool
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