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The Nvidia board just pushed out CEO Jensen Huang after 33 years.
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Today the company has an interim CEO, a brand-new board chair, and a stock price that suggests the business is in trouble.
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I’m “long” shares of Nvidia (Nasdaq: NVDA). And I’m not selling.
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Here’s what’s going on.
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Jensen Huang resigned as CEO on Thursday. He also gave up his seat on the board – effective immediately.
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The resignation follows reports of two extramarital affairs. One involved a businesswoman that U.S. officials have linked to Chinese intelligence. Huang has agreed to a closed-door briefing with lawmakers on Capitol Hill.
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It’s an unfortunate end for the founder who turned a small graphics chip company into the world’s most valuable business.
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Nvidia stock fell 5% today to around $165. Shares are down roughly 22% since the news first broke last month.
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So, what happens next?
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CFO Colette Kress is now the interim CEO. She’s been running Nvidia’s finances since 2013. And she knows the company’s customers and investors better than anyone.
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Harvey Jones becomes Nvidia’s first-ever board chair. He’s been a director since 1993.
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The board hired an outside firm to search for a permanent CEO. Ian Buck – the engineer who helped build Nvidia’s CUDA software – is one internal name to watch.
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The business didn’t change today. Nvidia plans its chips years in advance. The new Vera Rubin platform started shipping in August – and it’s the fastest product ramp in company history.
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Management expects revenues to grow 70% next fiscal year. And supply – not demand – is the bottleneck through at least early 2028.
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Nvidia reports earnings next Tuesday, November 17. This will be the first quarterly conference call that doesn’t include Huang.
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Now let’s look at the valuation.
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Analysts expect Nvidia to generate $261 billion of free cash flow over the next four quarters. The company already has nearly $100 billion in cash.
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Yet Nvidia trades at less than 12x forward earnings – the lowest valuation in decades.
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Nvidia also has $235 billion authorized for stock buybacks. That’s a massive amount of buying power. And it could put a floor under the share price.
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A historically low P/E combined with a huge buyback suggests limited downside from here.
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The departure of an all-star CEO doesn’t necessarily mean poor stock performance moving forward.
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For example, Steve Jobs stepped down at Apple (Nasdaq: AAPL) in 2011 and investors were nervous. Tim Cook put Apple’s cash pile to work with buybacks and dividends. The stock delivered a total return above 2,700% over the next 15 years.
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My view is that Nvidia stock has already bottomed.
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That’s why I’m holding my shares.
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Ian Wyatt
Editor, Daily Profit
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