Nvidia Corp. heads toward its sixth straight weekly drop, shedding $1.6 trillion in market capitalization after regulatory trouble and the sudden exit of long-serving chief executive Jensen Huang.
The chip giant’s shares dropped 4.3 percent on Thursday, bringing their loss for the week to 11 percent, according to CNBC. Over the past two weeks, the company has lost more than $1.2 trillion in value, dropping its valuation below $4 trillion and falling behind Apple in overall market capitalization.
The selloff accelerated after revelations regarding two extramarital affairs led to Huang stepping down as CEO and board member on Thursday. CBS News reported that Nvidia launched an investigation into Huang, who admitted to having an extramarital affair. Nvidia’s board convened late Wednesday following a report in The New York Times detailing a second relationship with a company vice president who reported directly to him.
The board named Colette Kress to serve as interim CEO while it conducts a search for a full-time successor, USA Today reported.
“Uncertainty around the leadership of Nvidia risks adding to this sharp price action given Huang’s important role as a face of the AI boom,” analysts said in USA Today.
Investor Envision Research compared the situation to Intel’s sudden resignation of CEO Brian Krzanich in June 2018 following an internal relationship policy violation, noting that Intel had delivered a cumulative total return of 258% during Krzanich’s five-year tenure, KuCoin reported. But analysts said that Huang served as the chief architect of Nvidia’s technological direction, making his replacement distinct.
Nvidia’s decline has rippled across equity indexes and exchange-traded funds due to its heavy weighting in market-cap-weighted funds. According to ETF Trends, 1,070 ETFs hold Nvidia, representing almost 20 percent of U.S. funds.
Vanda Research estimated that individual investors purchased a record $111 million of Nvidia shares during the opening thirty minutes of Thursday trading, roughly 41 times normal volumes.
Attention now shifts to Nvidia’s scheduled quarterly earnings report covering August through October, which will be released after the market closes on Nov. 17, USA Today reported. Nvidia expects around $108 billion in revenue this quarter, CNBC reported.
“earnings call just became the most important in the company’s history,” wrote Mark Malek, chief investment officer at Siebert Financial, in a commentary cited by USA Today. “I will be listening less for the quarter and more for the backlog. Are the orders still the orders?”
“What a new CEO CAN break is everything that hasn’t been built yet. Stewards protect what is already on the books. Builders decide what gets booked NEXT. Until investors know who the builder is, the stock doesn’t get its old premium back,” Malek added in USA Today.
Earlier coverage: Nvidia Shares Drop 7% as Board Debates Jensen Huang's Future