Nvidia shares NVDA remained under pressure on Friday, falling 2.17% at the time of writing after recovering from an intraday decline of 4.6%.
The latest losses followed a 4.3% drop on Thursday after founder and longtime CEO Jensen Huang resigned amid reports concerning his personal relationships.
The departure has raised questions about Nvidia’s leadership succession, corporate culture and exposure to potential regulatory scrutiny.
The company is also on track for its largest weekly market capitalisation decline on record.
However, analysts remain divided on the stock’s outlook, with some arguing that its valuation offers an attractive entry point while others warn that the controversy could create longer-term risks.
Nvidia valuation and earnings could support a recovery
Despite the recent selloff, Nvidia shares trade at less than 12 times estimated earnings for the next 12 months, according to Barron’s analysis.
A modest improvement in its valuation multiple could therefore support a significant recovery.
The company’s upcoming third-quarter earnings report on Tuesday could provide an important catalyst.
Investors will closely monitor whether Nvidia reiterates its forecast for 70% revenue growth in fiscal 2028.
Any confirmation could help restore confidence in its growth prospects.
Additional share buybacks could also support the stock if its valuation remains depressed.
XTB analyst Kathleen Brooks said Nvidia’s upcoming results would be closely watched following Huang’s resignation.
While Brooks expects another strong earnings report, with revenue potentially exceeding the $108 billion estimate, she said the company’s forward guidance would be more important for determining the stock’s direction.
Yorkville Ives also maintained a bullish view, arguing that Nvidia remains the clear leader in GPU chips for the AI industry, with an estimated two-to-three-year advantage over its nearest competitor.
The analysts believe the current valuation does not fully reflect the company’s position and see Colette Kress as a credible leader during the transition.
Leadership uncertainty remains an overhang
The absence of an immediate permanent successor is another challenge for Nvidia shares.
Chief Financial Officer Colette Kress is viewed as a potential interim leader, although the company is expected to require technical leadership for its next phase of growth.
Potential successors mentioned in early speculation include Ian Buck, Nvidia’s vice president of hyperscale and high-performance computing, and Arm Holdings CEO Rene Haas.
Yorkville Ives also identified Apple CEO Tim Cook as a possible outside candidate, describing him as a dark-horse option given Nvidia’s importance to the broader US technology industry.
A clearer succession plan or announcement of a shortlist could help reduce uncertainty surrounding the company’s future direction.
Morgan Stanley reiterated its overweight rating on Nvidia but lowered its price target to $267 from $300.
The firm acknowledged that Huang’s resignation, the absence of an immediate permanent successor and China-related regulatory risks represent setbacks.
However, it maintained that Nvidia’s underlying business remains strong and that the risk-reward profile is attractive even under more conservative assumptions.
China scrutiny and corporate culture pose risks
The biggest threat to Nvidia’s recovery could come from further developments surrounding the controversy that led to Huang’s departure.
Treasury Secretary Scott Bessent questioned on Friday whether Nvidia had a sufficiently robust system to prevent its chips from reaching China through intermediaries.
Speaking to CNBC, he said he expected the company’s board to conduct a thorough investigation.
Huang has reportedly agreed to testify before Congress, where lawmakers are interested in determining whether his reported relationship with a suspected Chinese intelligence agent resulted in the transfer of intellectual property or advanced hardware to China.
Hendi Susanto, portfolio manager at Gabelli Funds, said the next developments could depend on the findings of investigations and the level of scrutiny from Washington, particularly concerning China and export controls.
Truist also downgraded Nvidia to hold from buy, citing concerns about the company’s culture and the possibility that GPUs may have reached Chinese companies and government entities.
These concerns could affect future revenue prospects if they lead to tighter restrictions or additional regulatory action.
AI disclosure: AI tools assisted with research and drafting of this piece. An Invezz editor reviewed the facts, sources and wording before publication. Any opinions or analysis are Invezz’s, not those of an automated system.
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