‘jensen Huang Mattered’: Investors Worry About The Wider Ai Trade After Embattled Nvidia Chief Resigns

• Jensen Huang resigned as CEO of Nvidia on Thursday after multiple affairs surfaced.
• Nvidia's stock sold off on the news, but investors say the departure could have broader implications.
• "There's a real possibility that this has an impact on future business," investor Rob Arnott said.

Jensen Huang's resignation is hitting Nvidia's stock hard, but the implications could spill into the wider AI trade, investors say.

Huang has been central to Nvidia and the AI ecosystem, brokering deals and leading innovation at the company for over three decades. But after news broke that Huang had two extramarital affairs, including one with an suspected Chinese spy, the now ex-CEO stepped down on Thursday morning. Reuters later reported that Huang had a relationship with a second employee at the company.

Huang's exit has shaken the tech world, and the outlook for Nvidia and the AI sector have dimmed among analysts and investors. Wall Street firms soured on the stock amid the scandals, issuing a wave of downgrades that center on Huang's pivotal role and the vacuum his absence creates.

Investors are now watching nervously as the stock slides and the company that's been a lynchpin of the AI economy drifts into a new era.

Here's how investors and strategists are thinking about Huang's departure.

Rob Arnott, founder of Syzygy Asset Management

Arnott said Nvidia's sell-off is a cautionary tale for the broader AI trade, with valuations still high across many of its pockets.

One piece of bad news can sink a stock priced for perfection.

"They're all priced as if that'll never happen," Arnott told Business Insider on Thursday.

As for Nvidia's stock itself, Arnott said that while it looks like a bargain right now, there's still meaningful risk on the table for the company's future profit. Perhaps the company falls out of grace with the US government, he said, or perhaps revenues are lower in the absence of Huang's dealmaking.

"This is not just a figurehead disappearing. There's a real possibility that this has an impact on future business," he said. "That's why it got clobbered. It got clobbered because Jensen Huang mattered. He was absolutely central to their success."

Ben McMillan, CIO at IDX Advisors

McMillan said the Jensen Huang saga could be yet another catalyst for higher regulation for AI firms, especially as a Democrat majority comes into power in Congress after AI oversight proved to be a sticking point for voters.

Specifically, the Commerce Department could institute tighter export rules, stricter "know your customer" checks, and potentially implement geotracking into certain advanced GPU chips.

That's generally bad for the AI trade because regulation slows business and increases costs, which "Wall Street hasn't fully priced in yet," he said.

Ryuta Makino, tech analyst at Gabelli Funds

Makino isn't as bearish as some finance pros, even as tech stocks continue to trend downward on negative speculation about the AI trade.

That said, he says that short-term volatility is likely to persist.

"I don't see the worst-case outcome scenario some people envision," he said. "Obviously the worst part is the long-term and the product roadmap going into 2029 and beyond. I think if that does falter a bit, there may be some market share gains by competitors. There may be some lower spend cases in 2028/2029 and beyond, but whether it's structurally downward or a spend shift towards other comps is hard to tell. "

Mark Hackett, chief market strategist at Nationwide

Hackett said the risk stemming from Huang's departure largely looks confined to Nvidia for the moment, with investors piling into other tech names amid Nvidia's sell-off.

But he sees a risk that investors could begin to punish other AI giants with poorer balance sheets and growth that relied more heavily on speculation, he said, pointing to other volatile chipmakers and neocloud firms.

"Everything we've seen more recently, it is a little bit more winners vs. losers, a little bit more discernment about growth projects," he told BI. "The riskier you are in this space, I think the more permanent this damage is."

"I think that the game of musical chairs is what I've been worried about, where it's like, everybody feels like they have to overspend because the music's going to stop at some point and you want to be in the lead when that happens."

Daniela Hathorn, senior market analyst at Capital.com

Like many finance pros, Hathorn is waiting for Nvidia's earnings before issuing a formal prediction on where the AI trade may go from here, though she's not overly concerned about its longer-term growth prospects.

"It will be a case of seeing what comes in the next few days. We have earnings next Tuesday and that will shed some light on the recent profitability of the company. It's hard to know what the Huang situation will result in until we get more information about what was possibly shared or not," Hathorn said in an email. "AI as a whole continues to be driven by future expectations of monetization, not much should change there."