A Few Quick Thoughts About a Huge Topic

When I am out of the office, important market events occur at an uncanny rate.  The spiraling events surrounding Nvidia’s (NVDA) now-former CEO, Jensen Huang have significant ramifications, but business commitments last night and today are precluding me from a deep analysis.  Please let these bullet points suffice.

• Jensen Huang is by no means the first major executive to have an affair, even if that includes a subordinate.  In recent history, senior executives at McDonald’s (MCD) and Cboe, among others, have been ousted from their positions for that reason.

• That said, I don’t ever recall that the intra-corporate affair was revealed only after news of another affair that was alleged to result from espionage.

• Although there was no clear succession plan for Huang, the promotion of longtime CFO Collette Kress seems like a solid one.  She is well known after participating in conference calls and must have a good handle on the web of financial arrangements that NVDA has with a wide range of customers, counterparts, and suppliers.  It seems reasonable to believe that there is a deep bench of technologists who can facilitate ongoing chip design. 

• This matter will not end with Huang’s resignation.  I expect plenty of investigations by the incoming Congress.  Questions might include:
  • Were export laws willingly violated?
  • Is it true that a Commerce Department investigation into Megaspeed was abruptly dropped, as reports suggest?  If so, why, and at whose request?
  • What was in Secretary of State Rubio’s report that was reported to be ignored?  If it was indeed ignored, why?

• Meanwhile, investors are resolute in their desire to seek a silver lining wherever they can
  • Shortly after the NVDA news broke, investors immediately began to consider who might benefit from the market leader’s weakened conditions.  Those included pretty much every other chipmaker.  On October 30^th, 29 of the 30 components of the Philadelphia Semiconductor Index rose, with NVDA as the lone exception.  Advanced Micro Devices (AMD)and Broadcom (AVGO) have been soaring, and the sector has been doing quite well generally.
  • Concerns about AI models receiving competition from cheaper Chinese models could be alleviated if greater scrutiny about chip exports occurs.
  • That enthusiasm has spread to the broader market.  I don’t think “up day” was on many investors’ bingo cards this morning.  The rally is occurring as the bond market reopens to higher yields and oil ticks higher after the President posted that “we don’t need a deal with Iran” on Truth Social. 
  • If this can truly be deemed an isolated event, then stocks can go about their merry way, particularly if investor sentiment remains enthusiastic, if not euphoric.  No dip goes unbought and no rally unchased.