AI Stocks Fall as Investors React to Nvidia CEO's Departure and Sector Fallout
Market Reactions and Sector Impact Following Nvidia Leadership Shakeup
By Shashwat Chauhan
Nov 12 (Reuters) - Global AI-linked stocks were trading lower after bouncing off their sessions lows on Thursday, as investors weighed the fallout of Nvidia CEO Jensen Huang's departure on the sector, which is already pressured by funding and regulatory concerns.
Nvidia's Leadership Crisis and Immediate Market Effects
Chief Financial Officer Colette Kress will take over as interim CEO as Nvidia looks for a permanent successor, the company said, after news of Huang's two extramarital affairs plunged the chipmaker into its worst crisis ever.
As the centerpiece of the AI ecosystem, Nvidia finances infrastructure built around its chips - a strategy that has drawn scrutiny over circular funding and now risks hurting the sector as the leadership crisis unfolds.
Nvidia shares were last down 5.4% after dropping as much as 14.3% earlier in the session.
Nvidia-backed neocloud firms CoreWeave dropped 8.1%, but came off its lows. Chip stocks were mixed, with the Philadelphia SE Semiconductor index last down 0.9% after falling as much as 3.7%.
Investor Sentiment and Bargain Hunting
"The recovery looks partly driven by bargain hunting after an aggressive selloff, with some investors seemingly betting that Nvidia's competitive advantages, strong AI demand and established customer relationships will survive a leadership transition," said Daniela Hathorn, senior market analyst at Capital.com.
Buying from retail investors also helped put a floor under the Nvidia stock as they bought a net $111 million worth of stock in the first half-hour of trading, marking the biggest opening bid on record for the stock, according to data firm Vanda Research.
Market Value and Broader Sector Concerns
Still, Nvidia's market value was on track to close below $4 trillion for the first time since July 2025, shedding over $1 trillion over the past month as rising interest rates, high debt of tech companies and regulatory concerns dampened sentiment.
The biggest hammering came on Sunday after Nvidia's board announced an investigation into Huang's relationship with a businesswoman called Alice Huang, who is alleged to be a Chinese spy.
Neoclouds Drop, Rivals Shine
Impact on Nvidia-Backed Companies
"Nvidia has been called the 'Bank of AI'. If they have to take a step back because of what's going on, will that cut off funding to smaller companies that need it? That's an open question," said Joe Saluzzi, partner and co-head of equity trading at Themis Trading.
Neocloud company Nebius, also backed by Nvidia, shed 18% after it cut its 2026 revenue forecast following delays in third-party capacity additions.
Other AI cloud companies including IREN and Applied Digital were trading lower.
Legal Scrutiny and Company-Specific Developments
Super Micro Computer fell 12% after a report that the AI server maker could face a Department of Justice probe focused on the involvement of Alice Huang.
Competitors and Broader Market Trends
Bucking the broader gloom, shares of Advanced Micro Devices and Broadcom, which produce AI chips and compete with Nvidia, rose more than 4% each on expectations that the turmoil at Nvidia could create opportunity for rivals.
The intensity of the selloff across other chip and AI stocks appeared to ease.
Marvell Technology, which Huang called the "next trillion dollar company" in June, was down 2.5%. AI hyperscaler Oracle, which is expanding its cloud AI chip deals with Nvidia, was last down 1.2%.
Tech-heavy stock markets of Japan and South Korea closed nearly 0.7% lower, while tech stocks in Europe were down about 1%.
Regulatory and Valuation Context
Global tech shares sold off sharply earlier this month, after the Democrats swept the midterm elections, including in states opposed to data centers, stoking fears tighter regulation could slow the AI build-out.
Nvidia trades at about 12 times its 12-month forward earnings estimates, its lowest since November 2012, according to data compiled by LSEG. The company will report quarterly earnings next week.
(Reporting by Shashwat Chauhan in Bengaluru; Additional reporting by Johann M Cherian and Tharuniyaa Lakshmi; Editing by Arun Koyyur)
