Why Nvidia Stock Just Fell Again
Key Points
The Information reported that Huang's relationship with an alleged Chinese intelligence asset may have helped move at least $7.5 billion worth of chips to Chinese firms, including some banned for sale in China.
Nothing has been proven, and Reuters could not independently verify the report, but it helps solidify the issue as one of national security.
Though this is a developing story, the legal and political risks are substantial, and I would consider reducing exposure to Nvidia.
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Nvidia (NASDAQ:NVDA) stock fell 5.5% on Tuesday, Nov. 10, after a report deepened the scandal surrounding its CEO, Jensen Huang.
The S&P 500 and the Nasdaq Composite were down 0.4% and 0.7%, respectively.
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Nvidia stock drops as Huang report escalates the scandal
Nvidia was already falling over the investigation into Huang's relationship with an alleged Chinese intelligence asset. But this morning, The Information, a major tech news outlet, reported that the relationship may have helped move at least $7.5 billion worth of chips over several years to Chinese firms, including some banned for sale in China.
To be clear, these are still just allegations and nothing has been proven -- Reuters said that it could not independently verify the report -- but The Information is a highly reputable news outlet and its reporting should be taken seriously.
Nvidia's political risk could outweigh near-term revenue risk
This isn't the sort of thing that shows up in the next quarterly report, but if there is truth to these allegations, it could have major ramifications for the company. Jensen Huang has until Wednesday to answer three House committees' request for a briefing. The political blowback will only get louder if The Information's reporting is proven true.
Image source: Getty Images.
As always, remember to keep a level head, but I would consider reducing your exposure to Nvidia given the potential fallout.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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