Nvidia reports earnings on Tuesday for the first time since its founder's exit, with two trillion dollars in market value already gone
The artificial intelligence trade faces its next big test in the week ahead, and it starts on Tuesday when Nvidia reports earnings after the market closes, its first results since co-founder and chief executive Jensen Huang resigned on Thursday. The company's announcement said Huang stepped down as president, chief executive and board member effective immediately, without giving a reason. His exit, following reports of affairs with an alleged Chinese spy and two company employees, led some on Wall Street to fear the artificial intelligence heavyweight could dive 20 percent or more.
Instead, the chipmaker ended the week down about 13 percent, its sixth straight weekly decline, while the major averages scored their best week since August. Chief financial officer Colette Kress has been named interim chief executive while remaining chief financial officer, and Harvey C. Jones has become the board's first chair. The board is searching internally and externally for a permanent successor; Ian Buck, the company's vice president of hyperscale and high-performance computing, is emerging as an early favourite.
What investors will listen for
Results are widely expected to meet high expectations, with analysts' consensus near $2.52 per share, but investors will listen closely for any clarity on succession plans now that Huang has left. Kress, a 13-year veteran of the company who served earlier stints at Cisco and Microsoft, may lack the showmanship of her predecessor but can soothe investors looking for a steady hand until a successor is named. More importantly, traders are weighing entry points after a slide of more than 30 percent in six weeks that erased roughly two trillion dollars of market value.
Some are already buying. Jeff Kilburg, founder of KKM Financial, said the opportunity now is to buy and own the stock, and that he bought January $200 call options this week to define his risk; the stock last traded near $160. 'There's a ton of uncertainty, and I'm not trying to pretend like I know anything,' Kilburg said. 'But what I do know is that the line of sight is that they have a trillion dollars in demand verified, and that trillion dollars in demand, which takes them through 2028 between Blackwell and Rubin, that's not going away.' Dan Ives, a partner at Yorkville Ives & Co, has a twelve-month price target of $225 on the stock without Huang as chief executive and considers it a buying opportunity at current levels. Kilburg added that he was confident the company would find a way through. Other investors remain wary that the decline may have further to run.
Rotation rather than retreat
Far from abandoning the artificial intelligence trade, investors rotated into other technology stocks such as Apple, Advanced Micro Devices and Broadcom, a move bulls took as a sign of a healthy market where gains are dispersing more broadly. The benchmark index's technology sector ended the week up more than 2 percent, snapping a five-week slump. 'The Nvidia story is now idiosyncratic,' said Mark Hackett, chief market strategist at Nationwide Investment Management Group. 'There's a lot of nervousness priced in right now, and the good news is, the market has proven its ability to withstand idiosyncratic but painful moves in tech.'