Key Takeaways
- Nvidia shares fell 8% today after its board opened a probe into reports that CEO Jensen Huang was targeted by foreign intelligence, and Cipher Digital fell too.
- Nvidia has no public succession plan, leaving investors to ask who would replace Huang.
- Analysts expect Nvidia’s normalized EPS to rise from $9.31 in the year ending January 2027 to $15.91 the year after.
- Even before today, Nvidia traded at less than half its five-year average forward P/E.
Nvidia (NVDA) stock sank 8% today. On Sunday, its board said it’s investigating reports that CEO Jensen Huang was the “target of a foreign intelligence effort,” and Huang admitted to an affair in a memo to staff.
The selling hit AI data-center stocks too. Cipher Digital (CIFR) dropped 3% with no news of its own, which looks like guilt by association to me. On Nov. 2, Cipher said it had extended its Barber Lake lease to 20 years, raising its contracted revenue to $9.1 billion. Nothing in Nvidia’s boardroom changes those contracts.
No heir in sight
The New York Times reported on Oct. 29 that U.S. intelligence believed the woman, Alice Huang, was passing information to Beijing. A committee of independent directors is running the probe with outside counsel, and the board said it has “no reason to believe that either national security or NVIDIA secrets were compromised.”
But Nvidia has no public succession plan. “There is clearly risk that Jensen could be removed as CEO depending on the Board investigation,” Yorkville Ives’ Dan Ives wrote in a note Sunday, though he expects Huang to stay on in the near term.
Analysts expect Nvidia’s normalized EPS to nearly double to $9.31 in the year ending January 2027, then reach $15.91 the year after:
The probe doesn’t touch demand for Nvidia’s chips this year, so I don’t expect the news alone to move those estimates.
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The discount was already there
Economist Mohamed El-Erian wrote on X that the “so-called ‘key-man risk’ looms large here, and it’s doubtful markets have adequately priced it in.”
I see it differently. At Friday’s close, Nvidia traded at 15x forward earnings, less than half its five-year average of 36x:
At today’s price, it’s even lower. The multiple had already hit a five-year low last week as midterm data-center fears hit chip stocks, so a lot of bad news was already priced in.
Nvidia reports third-quarter results on Nov. 17. With the multiple this low, I think today’s selling is overdone, as long as Huang keeps his job. The board’s findings could change that, and it hasn’t given a date for them.
So what is Nvidia stock actually worth?
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