NVIDIA loses $1.6T as stock heads for sixth weekly decline
What's the story
NVIDIA, once the world's most valuable company for most of this year, is facing a major market downturn. The company's shares have been on a downward spiral, heading toward their sixth consecutive weekly decline, the longest losing streak since 2012. The stock has lost nearly 29% of its value during this period, translating to an approximate $1.6 trillion drop in market capitalization and pushing it below Apple in the pecking order.
Leadership change
Jensen Huang resigns as CEO after extramarital affairs
NVIDIA's co-founder and CEO, Jensen Huang, resigned on Thursday after two extramarital affairs were made public. One of the alleged affairs was with an alleged Chinese spy while the other was with an employee.
Following his departure, finance chief Colette Kress has been appointed as interim CEO until a permanent replacement is found.
Market response
NVIDIA shares fall 4.3% on Thursday
Following Huang's resignation, NVIDIA shares fell by 4.3% on Thursday, taking their weekly loss to 11%.
The news of his first reported affair broke over the weekend when he sent a letter to employees apologizing for being "unfaithful to my wife."
The board met late Wednesday after The New York Times reported on the other affair with a vice president of health care at NVIDIA.
Future outlook
Analyst predicts tough transition for NVIDIA in coming months
Gil Luria, an analyst at D.A. Davidson, has predicted a tough transition for NVIDIA in the coming months with Huang's departure.
He has lowered his price target from $300 to $200 but kept a buy rating on the stock.
"We believe the market has appropriately adjusted for this transition," he wrote in a report on Thursday.
Election impact
Midterm elections impact on NVIDIA shares
Prior to Huang's departure, NVIDIA shares fell about 9%.
The decline was largely due to the midterm elections that saw Democrats win decisively and dozens of ballot measures passed that could potentially slow down artificial intelligence development.
In the weeks leading up to the election, NVIDIA's stock was also falling with other AI stocks over fears that rising interest rates would hurt debt-heavy companies.
Earnings forecast
Pressure on Kress ahead of quarterly results next week
Next week, Kress will be under pressure as NVIDIA is set to report its quarterly results on Tuesday.
Analysts expect a staggering 91% year-over-year revenue growth to $108.9 billion, according to LSEG.
This is an 18-fold increase from the same quarter in 2022, just before OpenAI launched ChatGPT and ushered in the generative AI era.