Nvidia shares rose 3% on Wednesday, rebounding after two days of losses tied to revelations about CEO Jensen Huang's affair with an alleged Chinese spy. The stock fell 5.47% Tuesday and 4.3% Monday as details emerged.
Nvidia hired law firm Wachtell, Lipton, Rosen & Katz on Tuesday to investigate whether company secrets or national security were compromised. Huang returned to the office Monday and remained there Tuesday, conducting meetings ahead of the company's quarterly earnings on Nov. 17.
Bank of America outlined three scenarios for investors. In the first, the impact stays contained with leadership continuity. In the second, prolonged uncertainty pressures valuation before earnings. In the third, adverse findings, leadership disruption, or tighter restrictions trigger earnings reassessment, BofA research analyst Vivek Arya said.
Zacks' Chief Equity Strategist John Blank said the selloff reflected concerns that the U.S. might impose further restrictions and that more problems could emerge. "It's not good for Nvidia. It's not good for Jensen Huang. It's certainly not good for the AI trade," Blank told CNBC.
Morgan Stanley on Wednesday removed Nvidia as a top pick after shares dropped more than 25% since Oct. 2. Huang's leadership is important to the company's strategic direction, Morgan Stanley analysts said.
Nvidia (NVDA) shares face near-term pressure ahead of Nov. 17 earnings as investors monitor whether federal restrictions or leadership changes emerge from the investigation.