Nvidia shares rose in premarket trading on Wednesday after two days of losses tied to the scandal around CEO Jensen Huang. Investors are weighing whether the affair will spill over into the business ahead of the company's earnings on Nov. 17.
Nvidia's stock was 5.3% higher in premarket trading as of 5:47 a.m. ET on Wednesday. The move followed two days of declines linked to Huang's affair with an alleged Chinese spy.
Shares closed down 5.47% on Tuesday as more details emerged about the impact of the affair. They had fallen 4.3% on Monday.
Nvidia hires a law firm to investigate
On Tuesday, Nvidia said it had hired Wachtell, Lipton, Rosen & Katz to investigate whether company secrets or national security were compromised. Meanwhile, people familiar with the matter told CNBC that Huang returned to the office on Monday and tried to project a normal routine. He was also there on Tuesday, conducting meetings.
Analysts weigh three scenarios
In a Tuesday note, Bank of America outlined three scenarios with differing investment outcomes. In one, the impact stays contained with leadership continuity. In another, prolonged uncertainty pressures valuation before earnings. In the last, adverse findings, leadership disruption or tighter restrictions require an earnings reassessment, according to BofA analyst Vivek Arya.
Zacks Chief Equity Strategist John Blank said the selloff reflected two concerns: that the U.S. might impose further restrictions and that more problems might emerge as the news develops. Blank told CNBC on Wednesday: "It’s certainly not good for the AI trade"
Morgan Stanley, for its part, removed Nvidia as a top pick on Wednesday, after shares dropped more than 25% since it named the stock to the list on Oct. 2. Analysts there said Huang's leadership is crucial to the company's strategic direction.
Source: CNBC
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