NVIDIA shares are down 29%: Is it time to buy?
What's the story
NVIDIA, the leading AI chipmaker, has been hit by a storm of market conditions. The company's shares have plummeted nearly 29% from their 52-week high ($243.37), closing at $173.73 on November 11. The decline has been particularly sharp in November after reports surfaced that the board was preparing to remove CEO Jensen Huang due to two major controversies surrounding his personal conduct.
Market impact
Market capitalization plunges $1.7 trillion
NVIDIA has lost some $1.7 trillion in market value since October, with its valuation falling from $5.6 trillion to around $3.8 trillion in after-hours trading on November 11.
The company's business fundamentals remain strong but investors are now looking beyond earnings alone to assess the company's future prospects amid a possible slowdown in AI spending and supply constraints.
Financial performance
Despite stellar financials, investors remain wary of future growth
NVIDIA's Q2 financial results show the strength of its business, with a 106% year-on-year increase in revenue for the second quarter of fiscal 2027.
The company's data-center revenue, which is crucial to the AI boom, grew by an impressive 117%.
Non-GAAP earnings per share also saw a massive jump of 120%.
Despite these stellar numbers, investors are wary about future growth and returns on investment amid potential spending slowdowns and supply constraints.
Market expectations
Upcoming earnings announcement to be a crucial test for NVIDIA
NVIDIA's upcoming earnings announcement on November 17 will be a crucial test for the company.
Investors will be looking beyond the headline numbers to three things: data-center revenue outlook, ramp-up of new-generation chips and systems, and whether gross margins can remain close to current levels.
Succession risk
Concerns over governance and CEO succession raise red flags
NVIDIA's board is reportedly considering removing Huang due to two personal conduct controversies: an alleged extramarital affair with NVIDIA VP Kimberly Powell (raising workplace governance concerns) and a previously admitted affair with Alice Huang, a suspected Chinese spy (posing national-security risks).
Huang, who co-founded NVIDIA and has led it for 33 years, owns around 3.6% of the company.
There are serious concerns about whether NVIDIA can maintain its technological and strategic direction without him at the helm.