Nvidia’s turmoil is prompting a rotation across chip stocks

Nvidia 's leadership crisis is creating an opening for its biggest rivals as well as partners, as investors bet that Jensen Huang's departure could loosen the AI chip giant's grip on an industry it has long dominated.

From AMD to Broadcom and even partner TSMC , chipmakers are emerging as potential beneficiaries of the upheaval, with market watchers pointing to a possible redistribution of manufacturing capacity and a narrowing of Nvidia's technological lead.

"What you're seeing in markets now is a bit of a rotation into other advanced chip design companies, on the assumption that this will enable other companies effectively to catch up," said Mark Franklin, head of multi-asset solutions for Asia at Manulife Investment Management.

That shift comes as Nvidia grapples with the fallout from Huang's resignation, following revelations about his multiple affairs including with a woman believed by the U.S. intelligence community to be a Chinese spy.

Huang's departure could give competitors an opportunity to close the gap as Nvidia navigates leadership uncertainty, Franklin highlighted, adding that the rotation was already helping fuel positive momentum in other semiconductor stocks.

Farzin Azam, managing director of equities trading at Mizuho Americas, said the shift was evident on trading desks, with investors moving toward chipmakers less exposed to Nvidia's management turmoil.

"Names such as TSMC, names such as Broadcom, names such as Advanced Micro will come as winners of this because they don't have this overhang of a management disruption," Azam told CNBC.

Nvidia shares have plunged 11% so far this week, while rivals AMD and Broadcom have gained 30% and 24%, respectively.

TSMC, which manufactures Nvidia's most advanced processors, has also rallied 11% over the same period, as it stands to benefit, irrespective of which chip designer gains or loses. A rotation away from AI names perceived as risky also positions TSMC as a relatively safer play for those bullish on the overall theme.

The rotation away from Nvidia has also extended into less speculative corners of the semiconductor industry, including analog chipmakers such as Texas Instruments, Analog Devices and Infineon, as investors adopt a more defensive stance, he said.

Texas Instruments has climbed about 13% this week, while Analog Devices and Germany's Infineon have advanced 12% and 14%, respectively.

"If Nvidia can't muster the supply chain, then technology is the only competitive advantage. And without Jensen, can they maintain technology advantages? Given they're only a year ahead of their biggest competitors, it's not like the gap is massive," Patel said.

The challenge is particularly acute as hyperscalers increasingly develop proprietary AI chips to reduce their reliance on Nvidia, while AMD and other semiconductor companies race to capture a larger slice of the market.

Yet the upheaval doesn't necessarily signal an end to the broader AI investment boom.

Franklin noted that major technology companies are projecting higher AI spending in 2027, with further increases possible in 2028, signaling the investment cycle remains structurally intact even as investors reassess which companies stand to benefit.

The bigger question is whether growing competition and the proliferation of open-source technologies eventually commoditize AI capabilities, putting pressure on chip prices and investment returns, he said.

For Nvidia, the immediate outlook may depend less on its earnings than on whether its next leadership team can reassure investors.

Azam said the stock appeared inexpensive relative to its earnings growth prospects, but warned that ongoing investigations and management uncertainty could limit any sustained recovery.

He expects Nvidia's earnings due Nov. 17 to remain strong, with investors likely to focus more closely on management's plans for navigating the crisis.

The result could be a reshuffling of winners within the semiconductor industry, with Franklin saying that investors were becoming more comfortable staying invested while rotating and diversifying their portfolios, instead of abandoning the market altogether.