Jensen Huang Is Under Investigation. What's Next For Nvidia?

Public.com presents the rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Monday, November 9th. In today's episode, we'll talk about why NVIDIA's board is investigating CEO Jensen Huang over an affair with an alleged Chinese spy. We'll also recap earnings from Constellation Energy and Monday.com. Then stick around to the end of the show to find out why Elon Musk is officially pulling the plug on the Cybertruck. We got a great show for you today. So let's go. The markets are coming off a wild week. Last week, the S&P 500 lost 2.7% and the Nasdaq dropped by 3.4%. The market is going through a pretty tough stretch right now. Since peaking back on October 6th, the U.S. stock market has now wiped out $5.7 trillion in value. And 57% of the stocks in the Nasdaq 100 are now down at least The question investors are asking now is where does the AI trade go from here? The big fear right now is that the midterm results could lead to policy changes that make it harder. To build AI data centers, and that's on top of the concerns investors already had about the debt these companies are taking on and how much money these companies are spending on AI and whether they're going to start seeing a return on all that spending. Some people think that the AI bubble is bursting right now, and this is the end of the AI trade. I don't think I'm ready to go there just yet, but I do think. There's going to be some winners and losers if the AI build-out slows down. Personally, I think this is going to be a blessing in disguise for the big tech companies. The hyperscalers like Microsoft, Amazon, and Google could keep more of their cash if they spend less on constructing these AI data centers. And if these new data centers become harder to build while demand for compute stays strong, will the existing data centers these companies own? I think we might be entering a new chapter in the AI trade. We'll see where it goes from here. The good news is that the valuations for some of these AI companies is looking a lot more attractive now than they did a few weeks ago. And it looks like we're continuing to see a bounce back in some of these names. As I record this, the S&P and Nasdaq futures are pointing higher in the pre-market. We should learn more about the state of the AI trade this week. We're actually getting earnings from CoreWeave and Nebius. Those are two of the biggest neocloud providers in the world. We're also hearing from the chipmaker Cerebras. So I'm really looking forward to seeing what they have to say. And then outside of AI, we're getting the October CPI inflation report tomorrow morning. Followed by the PPI inflation report on Friday. So we got another action packed week ahead. We're going to be staying on top of all of it. So if you're new here, it is a great time to get subscribed to the podcast if you haven't already and tune in every day to stay in the loop. Let's run through some headlines, starting with NVIDIA. NVIDIA is dealing with a very interesting scandal straight out of a movie, and the stock is taking a hit as a result. Where do I start here? So over the weekend, CEO Jensen Huang sent an email to the company where he admitted to having an affair, and he apologized to his family. And the company in that email, but that's not where the story ends though, because Nvidia's board of directors has now launched an independent investigation into the affair. And the reason is because the affair might have been with a Chinese spy. The woman at the center of this is Alice Huang, no relation to Jensen Huang, obviously. Well, I guess there was a relationship there, but you know what I mean. Anyways, there were multiple reports that U.S. intelligence agencies suspected that she was spying for the Chinese government. Alice was an executive at a Singapore company called MegaSpeed. The company is like a NeoCloud provider in the area. They rent out NVIDIA chips and data centers across Southeast Asia. In fact, they became NVIDIA's biggest buyer. But the U.S. government has been investigating whether some of those chips that MegaSpeed bought got smuggled into China, which would break U.S. export rules. In fact, U.S. officials even asked NVIDIA to audit MegaSpeed last year over smuggling concerns. NVIDIA said they found no evidence that MegaSpeed had diverted any chips, but then Bloomberg reported that MegaSpeed had imported 50,000 more chips than NVIDIA found in their data centers. So. Something shady might be going on. MegaSpeed has denied all wrongdoing. So that's why the NVIDIA board and the U.S. government, for that matter, are getting involved now. Now, Jensen Huang previously said that his relationship with Alex Huang was just a normal business relationship. And to be fair, he never really said what kind of business that they were doing. But clearly, this is not a good look for Jensen because he has been lobbying the U.S. government nonstop to let him sell chips to China. And now finding out that he was having an affair with an alleged Chinese spy. Whose company was under investigation for smuggling GPUs makes all that China lobbying look way worse in hindsight. Now, look, NVIDIA's board did say that they have no reason to believe that national security or company secrets were compromised. But congressional leaders have asked Jensen Huang to attend a closed door national security briefing on November 18th. Which is my birthday and also the day after NVIDIA's earnings report. So that's going to be a very interesting week. I wouldn't be surprised if TMZ dials into the earnings call. But look, the market is freaking out about this story. NVIDIA stock is down 5% in the pre-market. And this is coming as NVIDIA stock was already down around 22% from its October high. Big picture, I don't think this changes how many chips NVIDIA will sell. I mean, Microsoft and Amazon aren't going to stop buying NVIDIA GPUs because of Jensen's personal life. but Jensen is the face of Nvidia, and if he is forced to step down, I mean, that could be a major blow to the company long-term. I personally don't think the board will push him out. I think he's just too powerful, but Jensen's reputation did take a big hit here. I'm sure we'll get more details over the next few weeks, but yeah, this is an absolutely wild story. And if it's true, and Jensen actually got honeypotted, I mean, he's going to be hearing these jokes nonstop for the next few years. I had to hold myself back on letting some of the jokes fly. I think I'll save For the group chat with the boys. On a side note, our AI companies are going to have to start doing like honeypot training. All I'm going to say is that if you do work for OpenAI or Anthropic or any sort of AI company at this point, and all of a sudden some really attractive women are interested in what you have to do at work, you might want to do a quick background check before you take things too far. Because if they got Jensen, they can get you. Let's talk about some stocks making moves today. Shares of Constellation Energy are moving higher this morning after the largest electricity generator in the U.S. beat on both top and bottom line, and they raised their full-year guidance. Third-quarter revenue jumped by 45% to $9.55 billion. The adjusted earnings per share came in at $5.06. Both easily topping expectations. But the key thing to note is the company also raised their full-year outlook. See, Constellation's big growth story has been selling power to AI data centers. But last week, the stock fell nearly 10% on fears that the midterm results would lead to a data center moratorium. So the fact that the company still increased their guidance was a good sign, and shares are up around 3% this morning at the time of this recording. AMD stock is getting a boost this morning after the investment firm Oppenheimer upgraded stock this morning with a price target of $600. I also think the market might be pricing in AMD taking advantage of this potential vulnerability at Nvidia. As a result, AMD stock is up around 10% this morning at the time of this recording, but the stock is still down more than 20% from its highs from a month ago. Now on the flip side, shares of monday.com are sliding this morning after the workplace software company. issued a disappointing fourth quarter revenue forecast that overshadowed their strong third quarter results. In Q3, revenues grew by 19% to $377 million, and operating margin widened from 15% up to 24%. Also, adjusted earnings came in at $2.14 a share versus the $1.41 expected. So that was a solid quarter. The problem, though, The company is expecting a 14% growth, which is down from the 19% growth in Q3 and 22% growth in Q2. This kind of goes back to what we've been talking about for the last few months. Software companies are scrambling to prove that AI won't replace them by rolling out their own AI tools. Monday.com's AI product did hit $36 million in annual recurring revenue last quarter, but the co-CEO admitted that shifting to an AI-first business is causing near-term operational headwinds. As a result, the stock is down 5% this morning and now down 40% on the year. Let's wrap the show with a fun fact. Tesla has sold about 73,000 Cybertrucks since launching in late 2023. And it now looks like the Cybertruck is nearing the end of the road. On Friday of last week, Elon posted on X that Tesla will wind down Cybertruck production around the middle of next year. And the goal is to free up room in the Texas factory for the CyberCab. The Cybertruck has been very disappointing. It was one of the most hyped cars ever. Tesla first showed it off back in 2019, and Elon was predicting sales would hit around $250,000 a year. Obviously, it got nowhere near close to that. In fact, one of the biggest Cybertruck buyers last year was SpaceX, which spent $131 million buying Cybertrucks, according to their financial reporting. So Elon literally had one of his companies buy products of another company. So if you take those sales out, the Cybertruck numbers look even worse. Clearly, this car didn't resonate with truck buyers. Just for some context, the number of total Cybertrucks sold in the last three years combined is how many Ford F-Series trucks are sold in a single month. But you know, I still think the Cybertruck looks kind of cool, all right? I see them in my neighborhood all the time. I think the problem with the truck is that when Tesla first showed it off... They were promising a starting price of around $40,000. But when the truck finally went on sale, it cost more than $60,000. Plus, the people that actually used a truck for work, I mean, a Cybertruck for them might not be very practical. So yeah, the Cybertruck was a major flop. Big picture though, Tesla has now killed off the Model S, the Model X, and now the Cybertruck. I think the company is doubling down on what works, which is the Model 3 and the Model Y. And they're pivoting the rest of the company to focus more on robotics. And we'll see you guys in the next one.