Nvidia stock price falls to a 14-year low, but CEO departure and concerns over AI cast a shadow over this "bargain" deal

Noel Randewich

Reuters, November 12 - Based on one of Wall Street's most favored metrics, Nvidia (NVDA.O) shares appear quite attractive.

Since hitting an all-time high on October 6, Nvidia’s share price has fallen sharply, with its price-to-earnings ratio currently at just 12 times. This is the company's lowest valuation level since 2012. At that time, the chipmaker was contending with Advanced Micro Devices (AMD.O) for dominance in the gaming graphics card market, while also striving to establish a foothold in tablets and other mobile devices.

On Thursday, after CEO Jensen Huang resigned, the stock dropped more than 5%; for the week, shares were down about 12% overall, pressured by news of his extramarital affair, including an alleged relationship with a woman said to be a Chinese spy (link).

As Nvidia seeks a permanent successor, CFO Colette Kress (link) will serve as interim CEO.

But concerns over leadership are not the only factor weighing on investors. Nvidia’s GPUs have powered the artificial intelligence boom, but shares are now down over 30% from their record high, largely due to worries that growth in AI data center construction may be slowing.

“This is a key personnel event, not a demand event. No one is going to cancel GPU orders simply because the CEO resigned. Based on historical experience, when a CEO steps down suddenly, the market needs time to digest the investigation and succession process before the stock price bottoms out,” said Erik Kratz, co-head of wealth management and chief investment officer at Chicago’s Arena Private Wealth.

Nvidia is set to announce quarterly results on Tuesday, and investors are watching closely to see if the company can maintain strong growth momentum following Jensen Huang’s departure.

Investors tend to favor stocks with lower P/E ratios, but a lower multiple may also signal skepticism about the company’s ability to meet earnings expectations.

While Nvidia shares have tumbled in recent weeks, analysts have so far maintained strong profit growth forecasts, expecting demand for Nvidia chips to continue exceeding supply. This could change after Nvidia reports its quarterly earnings.

According to data from London Stock Exchange Group (LSEG), analysts on average expect Nvidia’s revenue in the October quarter to surge 92%, with net profit up 89% year-over-year to over $60 billion. Investors will be paying close attention to Kress’s comments on Nvidia’s outlook, which may be more important than the results themselves.

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