- Morgan Stanley removed Nvidia from its top semiconductor picks on Wednesday
- Nvidia shares fell for two sessions amid CEO Jensen Huang's growing scandal
- Morgan Stanley noted Huang's leadership is key to Nvidia's strategic direction
Morgan Stanley has removed Nvidia Corp. from its top-pick slot in semiconductors, CNBC reported on Wednesday. The chipmaker's shares had fallen for two straight sessions as the scandal involving Chief Executive Officer Jensen Huang deepened.
In a note on Wednesday, Morgan Stanley analysts reportedly said that Huang's leadership was central to the company's strategic direction. This comes in the backdrop of the AI chipmaker facing a $470-billion selloff this week.
The call comes just weeks after Morgan Stanley analyst Joseph Moore put Nvidia back at the top of his list. After a roadshow with the company's management, he wrote that “we agree and are reinstating the stock as our Top Pick in semis,” TheStreet reported at the time.
As recently as Nov. 9, the brokerage's semiconductor team had kept Nvidia as its top pick and called the sector's selloff one that “appears to be excessive,” according to a Futu News report on that note.
Nvidia shares fell 4.3% on Monday and 5.47% on Tuesday, a drop of nearly 10% over two sessions. The selling followed reports about Huang's affair with an alleged Chinese spy. On Wednesday the stock recovered some ground and was up 5.3% in US premarket trade.
On Tuesday, Nvidia said it had hired law firm Wachtell, Lipton, Rosen & Katz to examine whether company secrets or national security had been compromised.
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Other analysts are also weighing the fallout. Bank of America's Vivek Arya set out three scenarios in a Tuesday note, CNBC reported. They range from a contained impact with leadership continuity to an escalation involving adverse findings, leadership disruption or tighter restrictions that would force a rethink of earnings estimates.
John Blank, chief equity strategist at Zacks, was blunter. “It's not good for Nvidia. It's not good for Jensen Huang,” he told CNBC's Squawk Box Europe. He said markets were worried that the US could impose further restrictions and that more problems could surface as the story develops.
The next major test for Nvidia comes on Nov. 17, when the company will declare its quarterly earnings.
ALSO READ: Nvidia Lost $470 Billion In Two Days. Now Futures Are Betting On A Comeback
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