Baird downgrades Nvidia, citing CEO Huang uncertainty

Morgan Stanley removed Nvidia ↘ 5.47% from its list of top semiconductor picks on Wednesday, Nov. 11. On the same day, Baird downgraded the chipmaker. Both moves came as Wall Street weighs the fallout from CEO Jensen Huang's admitted affair with a woman U.S. intelligence agencies suspect of spying for China. Even so, Nvidia shares rose in premarket trading after two straight days of losses. They had closed 5.47% lower on Tuesday, Nov. 10, Quartz reported. Wall Street sentiment toward the company "is starting to crack," Bloomberg wrote.qz.com+1

Morgan Stanley's stop-loss rule

Morgan Stanley analyst Joseph Moore said the bank dropped Nvidia under its stop-loss policy for top picks, because the stock had fallen more than 25% since October. He kept an Overweight rating and a $300 price target, Yahoo Finance reported. The bank said uncertainty will continue in the near term because Huang's leadership is "crucial to the company's strategic direction." Morgan Stanley had added Nvidia to the list on Oct. 2.finance.yahoo.com+1

Baird analyst Tristan Gerra cut Nvidia to neutral from outperform and lowered his price target to $200 from $500. That move puts Baird among only three of 64 analysts with a hold or underperform rating, according to LSEG data cited by CNBC. Gerra predicted "a new ban on H200 exports to China" and estimated a possible $5 billion write-down tied to inventory waiting for Chinese demand. He also said spending on AI by large cloud companies might grow only about 40% in 2027. He titled his note "Icarus' Rise and Fall; Company Will be Fine," Yahoo Finance noted. In it he wrote that the stock will "at best stay in a trading range until the dust settles."cnbc.com+1

Other banks have also trimmed their targets. On Tuesday, Citi lowered its target to $285 from $315 but kept a Buy rating. Wednesday's rebound came alongside a broader rally in chip stocks, helped by better-than-expected results from CoreWeave ↘ 0.51%. Even with the bounce, Nvidia has lost about $700 billion in market value in November, Yahoo Finance reported.sg.finance.yahoo.com+1

Investigations ahead of earnings

Huang apologized to employees in a message on Sunday, Nov. 8. "There is no excuse for what I did," he wrote. On Tuesday, Nvidia hired Wachtell, Lipton, Rosen & Katz to lead an independent board investigation. Joon H. Kim, a former acting U.S. attorney, will head the work. The board said nothing it has seen so far suggests trade secrets or national security were put at risk. China's Foreign Ministry called the spying allegation unsubstantiated.qz.com

Pressure on the company is also coming from outside. The Justice Department is investigating Megaspeed International, a Singapore-based firm suspected of illegally sending Nvidia chips to China. A shareholder class action has been filed against Nvidia and Huang, and three House committee chairs have asked Huang to meet privately with lawmakers on Nov. 18. That is one day after Nvidia is scheduled to report quarterly earnings on Nov. 17.qz.com

"It's not good for Nvidia. It's not good for Jensen Huang. It's certainly not good for the AI trade," Zacks strategist John Blank told CNBC.