Nvidia faces mounting pressure as Baird downgrades its stock following executive scrutiny and potential export restrictions on advanced artificial intelligence chips.
CEO Jensen Huang confronts probes over his relationship with a suspected Chinese intelligence asset, while analysts warn of valuation risks and slowing growth across data center infrastructure.
The Bottom Line
- Baird analyst Tristan Gerra downgraded Nvidia (NASDAQ: NVDA) to neutral and slashed his price target from $500 to $200.
- New probes involving CEO Jensen Huang and potential H200 chip export bans threaten significant revenue write-downs.
- Morgan Stanley analyst Joseph Moore removed Nvidia as his top pick after shares fell more than 25% since Oct. 2.
Baird Analyst Lowers Nvidia Price Target Amid Mounting Problems
Marketwatch reported that Baird analyst Tristan Gerra lowered his price target on Nvidia shares from $500 to $200. Gerra no longer recommends buying the chip maker’s stock as problems mount around executive leadership and regulatory headwinds. Midday Wednesday, Nvidia stock climbed more than 4% to reach $175.85, following a five-day slump that marked its poorest showing since September 2022 as of the close on Tuesday.
Citing the firm’s stop-loss guidelines, Morgan Stanley analyst Joseph Moore stripped Nvidia of its top-pick status in a note published Wednesday following the stock’s significant recent slide.
Nvidia shares had fallen more than 25% since Moore added the company to his top picks on Oct. 2, he said. While the analyst’s overweight rating on Nvidia’s stock remains, he cited near-term uncertainty because Huang’s leadership directs the company’s strategy.
Probes into Jensen Huang Create Uncertainty for Nvidia
Both the U.S. government and Nvidia itself are launching investigations into CEO Jensen Huang regarding his ties to an individual suspected of being an intelligence asset for the Chinese government.
Following Huang’s admission of an extramarital affair with Alice Huang, an executive at Singapore-based cloud provider Megaspeed whom the U.S. suspects of intelligence ties, uncertainties have compounded for the firm. Gerra noted an upcoming in-person briefing with Congress, U.S. government investigations, potential charges, and ambiguity around whether Huang will remain as CEO.
“The U.S. could introduce a new ban on exports of the company’s H200 chips to China,” Gerra wrote in a client communication, projecting that such a move could force a $5 billion impairment or a devaluation of those specific units currently held in Nvidia’s inventory.
The chip maker faced a similar write-down last spring when the U.S. banned sales of less capable chip versions to China. Gerra also sees potential export controls targeting loopholes that route chips into Southeast Asian data centers.
| Analyst Firm | Analyst Name | Action Taken | Key Metric / Target |
|---|---|---|---|
| Baird | Tristan Gerra | Downgraded to Neutral | Price target cut from $500 to $200 |
| Morgan Stanley | Joseph Moore | Removed as Top Pick | Shares down over 25% since Oct. 2 |
Data Center Demand and 2027 Outlook
Demand from U.S. cloud providers for Nvidia’s graphics processing units currently far exceeds supply, meaning any regional weakness in Southeast Asia can be absorbed through next year, Gerra said. However, if China-related demand disappears or Nvidia restricts shipments to Southeast Asian data centers, revenue impacts could concentrate in quarters when major cloud providers face spending constraints.
“Additionally, Gerra said estimates for the data-center buildout in 2027 are delayed, as limited supply for components signals a potential slowdown and demand could be waning as well,” Baird analyst Tristan Gerra said.
In that case, Gerra estimated the annual growth of hyperscaler spending on AI could pull back to 40% or less. With Nvidia’s valuation already factoring in some development concerns, Gerra believes the stock will at best stay in a trading range until the dust settles. Megaspeed could also face action from the U.S. Justice Department, potentially triggering pre-emptive measures from other regional data-center operators with China demand exposure.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
