CNBC Panel Divided on Nvidia After Huang Controversy

Nvidia (NVDA) slid 5.53% on Tuesday, continuing a decline triggered by CEO Jensen Huang's relationship with an alleged Chinese spy. CNBC's Investment Committee was divided on the best approach to Nvidia stock, balancing a potential dip-buying chance against long-term corporate governance issues.

Dan Ives, senior managing director at Yorkville Ives & Co, anticipates the board investigation will last four to six weeks. Nvidia investors face uncertainty until that probe concludes.

Is the Nvidia Decline About Governance or Demand?

Josh Brown, CEO of Ritholtz Wealth Management, said on CNBC he has owned Nvidia for 12 years through 70% declines. He does not support removing Huang unless proof emerges that he knowingly violated rules involving other countries.

Another panel member described it as a governance discount rather than a demand discount, and aimed to increase an underweight holding.

Meanwhile, the Philadelphia Semiconductor Index (SOX) rose nearly 7% on Monday even as Nvidia fell 4%, as reported by Yahoo Finance.

Might Quantitative Selling Alter How Funds Trade Nvidia?

Joe Terranova, senior managing director at Virtus Investment Partners, noted that analyst ratings have barely shifted. Roughly 78% still rate Nvidia a buy, and the consensus 12-month price target dropped from $324 to $320.

However, Seaport set a $180 sell target, according to the panel, while Citi lowered its target to $285 and Wells Fargo to $300. Bank of America removed Nvidia from its US 1 List of top picks but kept its buy rating unchanged.

Terranova also said a high-frequency trader told him it follows price action, not fundamentals. A drop below Nvidia's 52-week low could push more algorithm-driven funds to the sidelines.

Separately, Ives said investor chatter suggests a 15% chance of Huang's removal. He has stated that Huang's departure would reduce Nvidia's value by 25% to 30%.

Alice Huang worked as an executive at Megaspeed, a Singapore-based Nvidia customer. A network linked to her reportedly shipped at least $7.5 billion in Nvidia hardware to Chinese companies, according to The Information. Beijing calls the spy allegation unsubstantiated.

Trump has backed Huang to remain, yet the FBI is investigating whether foreign intelligence targeted him.

A board finding that Huang was merely a target of foreign intelligence would ease the governance worries. Conversely, confirmed diversion could lead to export restrictions or fines, shifting a governance issue into a regulatory one.