Stock market, Jensen Huang resigns... “Pay attention to the speed of successor appointments and U.S. regulations on China”

With NVIDIA CEO Jensen Huang resigning due to an affair scandal, domestic securities firms predicted on the 13th that stock market volatility may occur depending on the speed of the selection of successor executives and the U.S. Congress's trend of regulating semiconductor exports to China.

While it is expected that this scandal will not lead to a slowdown in demand across the artificial intelligence (AI) industry, there are also concerns that it will not end in short-term stock price noise.

Last night, Nvidia's board of directors announced in a statement that CEO Hwang would step down from his position as CEO and director immediately. Colette Kress, Chief Financial Officer (CFO) and Executive Vice President, was appointed as interim CEO.

Jiyoung Han, a researcher at Kiwoom Securities, said, “Although it is a burden on AI investment sentiment in the short term, the possibility of it leading to a slowdown in demand across the AI ​​industry is limited.” She added, “Investment sentiment toward the AI ​​industry as a whole appears to still be valid given that the buying trend that was focused on Nvidia has shifted to competitors.”

Last night on the New York Stock Exchange, Nvidia started with a sharp drop of 13.08%, then narrowed its decline and closed down 4.34%. Micron (-1.59%) and SanDisk (-4.11%) also fell.

Competitors AMD (5.86%) and Broadcom (5.54%) showed strength in anticipation of a return from this incident.

Citing past cases of CEO replacement at major technology companies as an example, one researcher pointed out, "The prolongation of the management gap and the maintenance of the growth of existing businesses were more important variables for corporate value than the CEO replacement itself."

In the case of Apple in 2011, when Steve Jobs resigned, the succession process was carried out as planned, and earnings growth was solid, so the stock price recovered quickly. On the other hand, when Intel's Brian Krzanich resigned in 2018, the selection of a successor was delayed, and the stock price fell 8% a year later.

However, some say that it is difficult to simply compare this scandal with past cases, given that Chinese spies may have been involved and there are suspicions that the US administration of Donald Trump was already aware of this.

Moon Nam-joong, a researcher at Daishin Securities [003540], said, “The U.S. Democratic Party has announced a large-scale investigation into suspicions of collusion between Jensen Huang and the Trump administration,” and added, “The likelihood that it will end in short-term stock price noise has decreased.”

Researcher Jiyoung Han also pointed out, “It is burdensome that this incident has led to a growing movement by the U.S. Congress to strengthen regulations on semiconductor exports to China.”

In the short term, it is necessary to pay attention to NVIDIA's third quarter performance to be announced on the 18th, Korean time, AI demand forecast to be announced in the conference call, and whether the existing business strategy will be maintained.

Kyeong-min Lee, a researcher at Daishin Securities, said, "If solid demand and plans for next-generation graphics processing units (GPUs) are confirmed through the performance announcement, investment sentiment in the semiconductor industry will further improve."