A Jensen Huang Exit From Nvidia Could Slow AI Dealmaking, Financing Across The Industry, Morningstar Warns

The firm kept its $310 fair value on Nvidia but said the investigation of its CEO “may lead to” his exit.

• Morningstar said demand for AI computing power remains above supply and does not expect the probe to affect Nvidia’s revenue in the near or medium term.
• The firm added investigations and espionage to the risks underpinning its ‘Very High’ uncertainty rating for Nvidia.
• It also noted Nvidia CEO Jensen Huang owns about 3.6% of the company, which could improve his chances of remaining in the role. 

Morningstar said Tuesday that if Nvidia (NVDA) CEO Jensen Huang departs, it could ripple through the artificial intelligence industry as the company’s board investigates him.

“We’ve long considered Nvidia and Jensen Huang to be at the center of the AI ecosystem,” Morningstar analyst Brian Colello wrote in a note on Monday. “His departure could lead to less AI dealmaking and financing, greater regulation, and more political backlash around artificial intelligence.” He added that the investigation “may lead to” Huang’s exit. 

NVDA stock was recovering in early-morning trade, up almost 2% at the time of writing, after a drop of over 4% in the previous session, which wiped out over $200 billion in market value.

Rivals such as Advanced Micro Devices (AMD) gained over 13% on Monday, while Broadcom (AVGO) jumped more than 8%.

Limited Near-Term Impact On Nvidia’s Business

Despite the uncertainty surrounding Huang, Morningstar maintained its fair value estimate of $310 per share and its four-star rating, indicating that it considers the stock undervalued.

The firm said demand for AI computing power continues to exceed supply and does not expect the investigation to affect Nvidia’s revenue in the near or medium term.

“We also can’t rule out the investigation fading away and Nvidia returning to business as usual,” Colello wrote. However, Morningstar did add investigations and espionage to the risks underpinning its ‘Very High’ uncertainty rating for Nvidia.

Huang co-founded Nvidia and remains its only CEO. Morningstar noted that he owns about 3.6% of the company, which could improve his chances of remaining in the role. However, the firm also flagged that he does not have supervoting shares, which give some founders greater voting control than their economic ownership would otherwise provide.

Nvidia Board Launches Investigation Into Huang

Morningstar’s comments come after Nvidia’s announcement on Sunday that a committee of independent directors would investigate Huang.

The probe was initiated after reports by the Financial Times and The New York Times stated that U.S. officials believed Huang had a relationship with a Chinese woman who was recruited to spy for China. Huang told employees that he had an extramarital affair and apologized, but did not disclose any other details about the relationship. 

Nvidia’s board said it has no reason to believe that national security or company secrets were compromised. The allegations have not been established publicly.

According to Yale professor Jeffrey Sonnenfeld, Huang has a “50-50 chance” of staying on as CEO. He said previous CEO departures were not necessarily driven by public disapproval of infidelity, but by concerns about trust and disclosure.

Meanwhile, former Securities and Exchange Commission (SEC) chair Gary Gensler stated that the central question in Nvidia’s investigation of Huang is whether investors were misled and whether “material information” was withheld.

How Is Retail Feeling About NVDA Stock?

On Stocktwits, retail sentiment around Nvidia trended in ‘extremely bullish’ territory over the past day, alongside ‘extremely high’ levels of chatter. Platform data showed an over 750% increase in message volume over the last seven days. 

A Stocktwits poll asking users how they were reacting to the stock’s recent decline showed that most retail traders were using the opportunity to ‘buy the dip’, with a near-even split between those selling, holding, or waiting for the results of Huang’s investigation.

NVDA stock has fallen over 5% year-to-date and more than 10% in the last 12 months after the recent sell-off. 

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