Huangate Will Not Derail AI's Comeback
The Nasdaq Composite fell on Friday as Nvidia shares added to their recent losses, though the index still notched a winning week alongside the other two major averages.
The tech-heavy Nasdaq dropped 0.91% to 25,136.27, while the S&P 500 slid 0.4% to 7,561.67. The Dow Jones Industrial Average eked out a gain of 50.46 points, or 0.1%, to end at 52,347.55.
Equities initially popped after October’s producer price index reading — a measure of wholesale inflation — showed an increase of 0.3% on the month. Economists polled by Dow Jones had seen headline PPI rising 0.4%.
However, the report also showed producer prices gaining 6.5% from 12 months earlier — the biggest annual advance since November 2022.
Nvidia shares weighed on the broader market for another day. The stock fell 2% Friday, extending the more than 4% drop it saw in the previous session. The pressure came after the exit of the scandal-hit chipmaker’s founder and CEO Jensen Huang.
HSBC downgraded the chipmaker Friday to hold, believing that the stock will languish until the company lays out a permanent succession plan.
Nvidia’s chief financial officer Colette Kress, who’s worked at the company for more than a decade, will lead the chipmaker as interim CEO. The company’s board is looking both internally and externally for a full-time replacement for Huang.
Thomas Martin of Globalt Investments expects the process of finding a new CEO to “take a lot of time” and spur even more uncertainty for the name.
“What will happen to those types of financing arrangements, and will there be less of them just going forward or will there actually be unwinding of them?” the senior portfolio manager told CNBC. “What are the relationships going to be with their suppliers and with their customers? It’s just early days.”
The Dow, S&P 500 and Nasdaq all pulled back on Thursday after Huang stepped down from his post following reported extramarital affairs, including a relationship with a woman U.S. intelligence officials believe is a Chinese spy. Analysts told CNBC that Huang’s exit could trigger a 20% correction in the stock.
To be sure, Baird’s Ross Mayfield believes a lot of pain has already been priced into the stock, though he still anticipates volatility ahead. More broadly, he expects to see investors continue to rotate into non-AI corners of the market independent of the latest developments with Nvidia.
“Even before all of this came out, and even before the election, chip stocks had been under pressure. There had already been worries about a blue wave — worries about a Democratic sweep — [and] worries about the [return on investment] on all of this capex,” the investment strategist said. “It hasn’t really changed the broad tenor of the market.”
Even with the latest bout of market turbulence, the major averages notched weekly advances. The Nasdaq added 2.3%, while the S&P 500 rose 2.5%. The Dow gained 2.1%. All three indexes scored their best weekly performances since early August.
Another crazy week that started with revelations that Nvidia's CEO Jensen Huang had an affair with a Chinese spy who worked at the company, and from then on, every other day, we learned of more affairs.
Huang was asked to resign on Thursday morning. That day, the stock got hit initially, opening at $150 before settling at $165.
While many are buying the dip, others are waiting for the dust to settle and see who the next CEO will be.
As I stated yesterday on LinkedIn here, the stock is way oversold on the daily chart, but the weekly chart suggests more weakness lies ahead:
My best guess is the stock will be choppy till they name a permanent CEO, fluctuating between $155 and $175 the 100-week exponential moving average).
Interestingly, despite Nvidia's woes, the iShares Semiconductor ETF (SOXX) was up almost 10% this week and seems to be fighting back on the weekly chart:
The strength in semis helped power the Nasdaq up this week, and as I stated last week, the drop in the QQQs was another buying opportunity:
I'm actually very bullish on tech stocks over the next three months, even if the Fed raises rates in its upcoming December meeting (Dec 8-9th).
And while all the hoopla this week was on Jensen Huang's sexcapades and Nvidia's stock, consumer staples like Coca-Cola (KO) keep powering ahead to record highs:
That's a phenomenal chart, but I wouldn't chase it here even if it's likely to go higher.
Lastly, shares of neoclouds like CoreWeave, Inc. (CRWV) and Nebius Group N.V. (NBIS) got smacked today but the former had a decent week, up 14% after posting earnings, while the latter was down 10% this week.
Credit remains the big issue for neoclouds and I suggest you read Karl Gauvin's LinkedIn post here to understand why.
Still, I remain constructive on credit overall and hardly see any signs to panic:
Alright, let me end it there. I still feel lousy from this nasty bug I caught and need to rest.
Next week, I will go over the portfolio holdings of the top funds. Stay tuned for that.
Below,Nvidia’s former CEO Jensen Huang is facing fresh scrutiny after a Reuters report revealed a third alleged relationship involving another company employee. The latest revelation adds another twist to the controversy surrounding Huang’s departure from the chipmaker and allegations involving a businesswoman suspected by US intelligence officials of having links to Chinese intelligence.
US President Donald Trump has defended Huang, calling him an ‘honourable man’ and saying he believed the former CEO had no knowledge of the alleged intelligence links. Trump also reportedly urged Huang not to step down and later suggested Apple CEO Tim Cook as his replacement.
Meanwhile, the controversy is drawing growing attention in Washington. Republican lawmakers are seeking a closed-door congressional hearing with Huang to examine whether sensitive American technology or information could have been exposed. Huang has agreed to brief Congress ahead of Thanksgiving, although the official date remains unannounced. Josh Barnes brings you the story on Firstpost Live.
Next, the CNBC Investment Committee CNBC discusses NVIDIA, Micron, and Jensen Huang. On Thursday, NVIDIA's Board of Directors announced that Jensen Huang has resigned as President, CEO, and a member of the Board effective immediately. NVIDIA CFO Colette Kress has agreed to serve as interim CEO until a permanent successor is selected.
Also, earlier today, Kevin Simpson, Capital Wealth Planning founder and CEO, joined CNBC's 'Halftime Report' to explain his Nvidia strategy after selling half of his position. Jim Lebenthal is holding his position.
Lastly, on this episode of The Weekly Wrap, Steve Eisman argues that the AI debate now needs a differential diagnosis, with the midterm results, the resignation of Jensen Huang, and the threat of data center moratoriums creating winners and losers. He also covers existing home sales hitting a 16-year low, earnings from CoreWeave, Nebius, Cisco, and Charter, and closes with his list of favorite fantasy novels.
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