CEO's exit roils the stocks in Nvidia's orbit
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Illustration: Sarah Grillo/Axios. Stock: Getty Images
Jensen Huang's departure as Nvidia CEO is spurring investors to rethink the financial ties between the chip behemoth and some of the most heavily indebted AI entities.
Why it matters: Nvidia's role in the AI boom isn't limited to producing its highly sought-after GPUs (graphics processing units).
- It has also extended its vast financial resources to support a range of companies involved in the infrastructure boom.
Between the lines: Some of those same companies have now begun to slump in sympathy with Nvidia as the markets price in the new reality that whoever is ultimately tapped to lead the company will have far less flexibility when it comes to notching such unorthodox deals.
- Key man risk appears to be an issue for the companies in Nvidia's orbit as much as it is for Nvidia itself.
- "We believe that going forward, it may be more difficult for the company to negotiate new multi-party investments among ecosystem partners at the same scale it has done up to this point," Goldman Sachs analysts wrote Thursday.
The latest: Nvidia tumbled 4.3% on Thursday, though a retail rush to "buy the dip" helped the chipmaker bounce off its lowest levels of the day.
- Stocks with unusual financial ties to Nvidia were caught in the vortex created by Nvidia's plunge.
Case in point: CoreWeave, a company that builds data centers and sells access to its computing power, fell 6.9% on Thursday.
- Nvidia is CoreWeave's second-largest shareholder, with a more than 12% stake.
- Nvidia has committed to spend $6.3 billion buying any unused computing capacity from CoreWeave through 2032.
- CoreWeave itself is a major customer of Nvidia's.
State of play: Other companies linked to Nvidia seemed to suffer for it Thursday.
- Intel — Nvidia's venture capital arm owns a 4% stake — declined 2%.
- Fiber-optic cable maker Lumentum — which received a $2 billion Nvidia infusion to support R&D and future capacity — slumped 3.6%.
- Neocloud Nebius—in which Nvidia said it would invest $2 billion back in March— plunged 16.8%. (A disappointing outlook from the company Thursday also played a role.)
Yes, but: There were also some obvious winners from Nvidia's woes.
- Foremost among them were rival chipmakers Broadcom and AMD, which jumped 5.5% and 5.9%, respectively, on Thursday, as the disruption for Nvidia could provide them their long-sought-after chance to snatch some market share from the company.
What they're saying: In a note Thursday, Bernstein Research analyst Stacy Rasgon cited the "considerable uncertainty" around "the ability of any new CEO to truly fill Jensen's shoes given how tightly he managed the direction of the business and its relationships with customers, suppliers, employees and the broader industry ecosystem."
- The key question for the companies in that ecosystem is whether Nvidia's new leadership ultimately continues providing such support.
- "If they believe that these kinds of companies are inherently important to the sustainability of Nvidia, then maybe the support does continue," said Johnathan Owen, a portfolio manager at TwentyFour Asset Management.
- "But I would argue that they probably aren't."
The bottom line: Thursday's trading indicates that at least some of that uncertainty is being felt outside Nvidia itself.
