Has Nvidia Bottomed? Consider This First
It’s time to ask some tough questions about Jensen Huang and Nvidia.
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According to reports circulating Friday morning, former Nvidia (NVDA) CEO Jensen Huang had a third extramarital affair. This is in addition to previously disclosed affairs with alleged spy Alice Huang, and with Kimberly Powell, Nvidia’s Vice President of Healthcare.
I’m not a moralist. I believe extramarital affairs are a private matter between those parties directly impacted. It’s none of my business. However, Nvidia isn’t a marriage. It’s a business. Many of our readers invest in the stock, and that makes it my business. If you own or are considering owning shares of Nvidia, you are taking partial ownership of an entity that was shaped by Mr. Huang.
Time to Buy?
I keep getting the question, is now the time to buy? Nvidia shares seem to have bottomed, at least for now. With Mr. Huang’s exit, shares are up on Friday morning pre-market trading. The stock traded in the low $170’s, after finding support earlier this week.
Nvidia Shares Bounce Back
In fact, Nvidia shares are becoming more attractive, at least from a technical standpoint. The stock appears to have formed a bullish double-bottom pattern (points A and B). Thursday’s selloff occurred on the stock’s highest volume in over a year (arrow).
At this point, it would be easy to say that the bad news is out, the sellers are washed out, and the stock has bottomed. Despite these positive technical developments, I’m not a buyer of Nvidia at this time.
Fool Me Once…
We know that Mr. Huang is a cheater. This leads to some difficult questions.
If Mr. Huang was willing to cheat in a marriage, would he also cheat in business? If he was willing to deceive his wife, would he also be willing to deceive his shareholders?
When Nvidia reports earnings Tuesday after the closing bell, will you trust that those figures are 100% accurate? Or will you be shocked if, at some point over the future, Nvidia’s earnings or revenues need to be retroactively adjusted?
How would that affect Nvidia’s stock price?
Spy Games
Regarding Jensen Huang’s affair with alleged spy Alice Huang, can we say with 100% certainty that he never suspected she might be an operative for a foreign government? U.S. intelligence agencies suspected as much for the past year, and circulated a memo to that effect among U.S. policymakers in the spring of this year.
Aside from Mr. Huang, are there others remaining within Nvidia who were fooled by Ms. Huang? Will you be surprised if it comes out later that she had accomplices within Nvidia?
What effect would those revelations have on the stock price?
Bottom Line
These are not accusations. These are fair questions that need to be answered before I’m once again willing to put money to work in Nvidia.
I believe the sensational headlines are obscuring the real risks in this situation. Some folks assume that because Jensen Huang is gone from Nvidia, his actions can no longer have a negative effect on the stock’s price.
That’s a dangerous assumption. There are plenty of other options on the table.
At the time of publication, Ponsi had no positions in any securities mentioned.
