Chip stocks slide after Jensen Huang quits as Nvidia CEO

Wall Street's tech-heavy indexes closed lower on Friday, Nov. 13, as investors tried to work out what Nvidia's ↘ 2.01% sudden change in leadership means for the artificial intelligence trade. The S&P 500 ↘ 0.36% fell 0.42% and the Nasdaq Composite dropped 0.91%. The Dow Jones Industrial Average ended slightly higher. Nvidia shares fell again, giving the stock a sixth straight weekly decline. That is its longest losing streak since October 2012.marketscreener.com+1

On Thursday, Nvidia's board said Huang had resigned as president, chief executive and director, effective immediately. CFO Colette Kress will serve as interim CEO and keep her finance role while the board looks at internal and external candidates for a permanent successor.sec.gov

Chipmakers take the hit

Chip stocks fell the most. The Schwab Network ↗ 1.37% said the Philadelphia Semiconductor Index PHLX Semiconductor Sector Index ↘ 3.46% dropped 3.43%, while Economic Times put the decline at 3.7%. AMD Advanced Micro Devices, Inc. ↘ 8.75% sank nearly 10% and Broadcom ↘ 4.76% fell about 6%. Broadcom was also hurt by a Rothschild Redburn downgrade. AI cloud companies CoreWeave ↘ 6.13% and Nebius ↘ 9.92% also ended lower.economictimes.com+2

Anthony Saglimbene, chief market strategist at Ameriprise Financial ↗ 1.16%, said there had been "a loss of confidence." He added that Huang "was basically the AI champion and willing to use Nvidia's balance sheet to fund a lot of this AI expansion. That's gone". The Financial Times reported that Nvidia's board has approached Arm Holdings ↘ 4.63% CEO Rene Haas as a possible successor.economictimes.com

A fast fall

Huang co-founded Nvidia in 1993 and had led it ever since. His exit followed a New York Times report that he had an affair with Alice Huang, a former Megaspeed executive whom U.S. intelligence suspects of spying for China. Beijing denies the claim. Reports of a second affair with an executive who reported directly to him added to the pressure. The day his resignation was announced, Nvidia shares fell as much as 14% at the open before closing down 4.3%.apnews.com+1

Tests ahead

Investors are also dealing with inflation. U.S. producer prices rose 6.5% in October from a year earlier, the biggest annual increase since November 2022. Markets still expect the Federal Reserve to raise rates in December.schwabnetwork.com

Two events next week will test the AI trade further. Anthropic is expected to go public, and Nvidia reports quarterly earnings. Nvidia's results are due Tuesday, Nov. 17. Stephanie Balaouras of Forrester said that if Nvidia "stabilizes quickly under new leadership, the AI infrastructure boom will have demonstrated resilience." She added that sustained pressure on the company "would add evidence to the fragile side of the AI bubble ledger".foreignpolicy.com+2