Nvidia has dropped 21.1% in four weeks and its latest leg down has little to do with chips.
Last week’s slide hit the whole AI trade, but Monday’s 4.3% drop followed a board investigation tied to CEO Jensen Huang and his admission that he had been unfaithful to his wife with a woman the US government suspects is a Chinese spy.
This presents a novel risk that does not show up in a discounted cash flow model.
Shares of AMD, Micron, Taiwan Semiconductor and other AI-related stocks jumped while Nvidia was effectively the only red name on the day.
That leaves Nvidia 25.3% below its October 6 record close.
Nvidia’s board said Sunday that it opened an independent investigation after reports that Jensen Huang was the target of a foreign intelligence effort.
The board said it does not believe company secrets were compromised
Huang said he would cooperate fully with the board inquiry
China’s Foreign Ministry called the spy allegations groundless
Now, as unusual and extreme as these circumstances are, the case for buying the dip on Nvidia has history on its side.
This is Nvidia’s fourth drawdown of 20% or more since 2024.
The stock went on to set a new closing high after each of the first three.
Dip buyers have been rewarded each time they risked catching a falling knife.
But those sell-offs were about the broader market or the AI cycle, not the seemingly unblemished CEO and Godfather of AI.
On one hand, it’s hard to bet against the stock price of a company making $100 billion every three months.
At the same time, it doesn’t take any imagination to expect Nvidia to take a hit if Huang were to step down as CEO and a no-name successor filled his seat.
Elsewhere
📈 Wall Street brokerages called the AI sell-off overdone. Morgan Stanley recommended “buying the drop” and said the likely hit from tougher data center politics is a push of some projects from 2028 to 2029, not a derailing of AI spending. (Reuters)
🏦 Lenders are getting choosier about AI debt. Some banks are reluctant to finance more AI deals even when Alphabet or Anthropic backs the debt, after Thursday’s sell-off wiped $2.5 trillion off the Nasdaq 100. (Yahoo Finance)
📊 Hedge funds dumped tech stocks at a near-record pace. Tech was the most heavily net-sold sector in the week through November 6, roughly matching the record in Goldman Sachs prime brokerage data going back to 2016. (Investing.com)
Rapid-fire
Honda will build a $3 billion Ohio plant and add more than 2,000 jobs (CNBC)
Federal safety regulators opened a new probe into Waymo’s school bus fix (TechCrunch)
Oppenheimer says AMD shares are primed for a comeback (CNBC)
This Japanese dividend stock offers a value bet on new pharma breakthroughs (Best Ideas Club)
Anthropic could start marketing its IPO as soon as Tuesday at a lower valuation (Investing.com)
Sable Offshore shares crashed after its only crude buyer paused purchases (Yahoo Finance)
Berkshire more than doubled its buybacks to $9.65 billion last quarter (Opening Bell Daily)
On this day
🗓 November 10, 2008: The US government restructured its AIG rescue into a package worth about $150 billion, including a $40 billion Treasury purchase of preferred stock. It was the largest government bailout of a private company at the time.
Last thing
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