$NVDA · Parkev Tatevosian, CFA · 2026-11-09

We have big news for Nvidia stock investors, as the company's board of directors announced it will investigate the relationship between CEO Jensen Huang and the woman the intelligence community believes may be a Chinese spy.

In a memo to employees on Sunday, Nvidia CEO Jensen Huang acknowledged an extramarital affair, apologizing to his family and employees, and pledging full cooperation with an independent review by the board.

This is huge and very negative for Nvidia stock investors, including myself as I have owned shares for some time, and I am disappointed by this news.

The impact is significant, and one way to measure it is to look at today's price reaction. Nvidia's stock fell by more than 5% on this news, while the broader semiconductor sector is experiencing a significant rise.

So, this could have been a day when Nvidia's stock rose by more than 5%, but instead it fell by more than 5%, and this is just one way to measure the magnitude of the fallout from these events.

The investigation is still ongoing, so much of this will be mere speculation at the moment, but the risks are of course tilted to the downside. It will be interesting to see, and what I want to know is whether there has been any misconduct by CEO Jensen Huang to try to cover things up.

In the historical examples I have studied of such situations, CEOs have tried to cover up these extramarital affairs or matters that violate company policy by concealing expenses and changing certain things; This could be another major event that may follow if it turns out that Jensen Huang has made misleading financial reports or altered expenses, etc., in an attempt to cover up this relationship.

Nvidia CEO Jensen Huang is more important to Nvidia than any other CEO of his company, with the exception of Elon Musk, who I believe is more important to Tesla and SpaceX than any other CEO of any company in the world ever.

The importance of Nvidia's CEO is considered to be among the top five or ten most important figures in the world, given the value he added to the company as its founder, and his leadership of it to where it is today over the course of 25 years.

Therefore, the consequence I observe by looking at these historical examples is that the CEO is removed in most cases. They will either resign or be forced to resign. This is the big risk here for Nvidia.

Since Jensen Huang is so important to the company, if he is forced to resign, who will replace him? There is no other prominent person in the company about whom it can be said: "Well, they have a strong alternative who can take over the leadership role." I don't know.

But it can be said that the options are extremely limited. You will find it extremely difficult to replace a CEO of the quality of Jensen Huang and what he has achieved for Nvidia over the past few decades.

Now, the company's valuation was already cheap. Nvidia was trading a forward price to earnings, you know, at a very low double-digit number. This is a positive aspect for investors, which is that the downside of the stock is limited because the valuation is already cheap.

The price-to-earnings ratio is only 11 at the moment. This is when Nvidia's stock hit its lowest price in a very long time. Therefore, the valuation is actually cheap. This should limit some of those negative risks.

As for Nvidia, I don't think the downside is close to those levels if Jensen Huang is forced to resign or is fired by the board. Even when I look at the valuation using the discounted cash flow model, the intrinsic value of the stock is $313.

The current market price is $178 after a 5% drop today. So again, the stock appears to be significantly undervalued. This should reduce the downside risks, but it remains a major negative event.

This is an event that could be bad, terrible, or catastrophic. None of these results will be good. As a contributor, I am very disappointed to see this news and the developments in this story.

Once again, Nvidia's stock is trading near its lowest level in 52 weeks, which was $164. The current market price is $177. Once again, very close to its lowest level in 52 weeks.

This limits the downside here and compared to the intrinsic value, the stock also appears to be significantly undervalued.

So, having said all this, what am I going to do about my rating of Nvidia? If you didn't know, Nvidia has been ranked as the best stock you can buy right now. She had just released a video, probably a few days before this news broke.

I believe it was a Friday or a Thursday when I released the video, reminding investors once again that I believe Nvidia is the best stock to buy right now.

What am I going to do after this news? I will be downgrading Nvidia's stock rating. I no longer think it's the best stock to buy right now. I have removed it from the list.

I still keep Nvidia's stock in the top 10 list, but I wouldn't be surprised if Nvidia dropped out of the top ten after further investigation and learning more details.

Again, this is important news because of the risk it creates of Nvidia CEO Jensen Huang potentially having to relinquish his leadership role in the company. This is the great danger I see.

Therefore, I am downgrading Nvidia's stock rating, keeping it in the top ten, but removing it from the top of the best stock to buy list.

Nvidia is scheduled to announce its quarterly financial results on November 17. It was already one of the most anticipated earnings results of the season, and this news makes it even more important.

In fact, it makes it perhaps the biggest earnings announcement of the year, and possibly of several years past.

Investors will want to know the implications of this. They will be asking the CEO questions. The CEO may make some comments about the investigation and its impact on the business, etc., in his opening remarks. It will be a huge event by all accounts.