Wall Street has turned cautious on Nvidia Corp. at a pace rarely seen for the AI chipmaker. Seven brokerages downgraded the stock between Wednesday and Thursday morning as co-founder Jensen Huang's position became untenable, and he resigned as CEO on Thursday.
Baird, Oppenheimer, Bernstein, Evercore ISI, William Blair, KeyBanc Capital Markets and Melius Research all moved Nvidia off their buy-equivalent ratings. Several of them roughly halved their price targets. Cantor Fitzgerald, BMO Capital Markets, Citi, Stifel and RBC kept bullish ratings but cut their targets sharply.
Nvidia shares fell more than 13% at the open on Thursday, and the company's market value dropped below $4 trillion. The stock has lost more than $740 billion in market value since last Friday's close and about $2 trillion since its October peak.
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Who Downgraded, And To What
| Brokerage | Revised rating | Price target |
|---|---|---|
| Baird | Neutral (from Outperform) | $200 (from $500) |
| Oppenheimer | Perform (from Outperform) | Removed |
| Bernstein | Market Perform (from Outperform) | $200 (from $400) |
| Evercore ISI | In Line (from Outperform) | $186 (from $465) |
| William Blair | Market Perform (from Outperform) | — |
| KeyBanc | Sector Weight (from Overweight) | — |
| Melius Research | Hold (from Buy) | $185 (from $315) |
‘We've Had Enough'
Bernstein's Stacy Rasgon, one of the most closely followed semiconductor analysts, said the downgrade reflected leadership risk, not a weaker business. “On the positive, the fundamentals of the business (if not the leadership) are clearly still intact with numbers that remain massive (and probably still headed higher),” he wrote. He added that the shares were “almost absurdly cheap,” but said he found it hard to recommend buying in size.
Melius Research's Ben Reitzes, a longtime Nvidia bull, said the firm had decided “(reluctantly) to step aside.” He compared the situation to Hewlett-Packard in 2010, when “waiting to see what that Board would do (and who they would hire)… didn't work out.”
KeyBanc's John Vinh said Huang's exit “represents a material increase in strategic, organizational, and execution risk that warrants a higher risk premium and lower valuation multiple.” He added that it “will be challenging for NVDA to find a successor with the same leadership and strategic vision as Huang.”
William Blair's Sebastien Naji said Huang's departure and the added scrutiny of the company would be “a significant overhang on NVDA shares in the near term.” The firm will “wait for the dust to settle before reassessing,” he said.
Oppenheimer's Rick Schafer said reports of a second relationship, with an Nvidia executive, were a “‘one-two' punch” that “appears to have forced the board's hand.” He expects fundamentals “to take a backseat near term.”
Baird's Tristan Gerra, who moved first on Wednesday, titled his note “Icarus' Rise and Fall; Company Will be Fine.” He expects the stock to “at best stay in a trading range until the dust settles.”
The Holdouts
Not everyone has given up on the stock. Raymond James kept its Strong Buy rating and $515 target, arguing that “Nvidia is more than just its CEO.” Cantor Fitzgerald kept Overweight but cut its target to $250 from $350, in a note titled “A Very Sad Day.” BMO kept Outperform with a $240 target, and Morgan Stanley stayed Overweight at $300 while removing Nvidia as a top pick.
Dan Ives of Yorkville Ives had already set two valuations: $300 a share with Huang as CEO and $225 without him. “Jensen has created a black eye moment for himself and Nvidia,” he said.
Some investors pointed to the company's depth beyond Huang. “The reality is there is still 40,000 other employees at Nvidia, and there is some real talent there,” Manulife Investment Management CIO Nathan Thooft told CNBC.
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