Jensen Huang's Departure Doesn't Scare Wall Street! The Market Is Rushing to Grab the "Seat" Nvidia Is Vacating

Notice that Wall Street is not particularly worried about the risks facing the AI tradeeven though NVIDIA Corporation's (NVDA.US) long-time CEO Jensen Huang has departed amid a series of romantic scandals. Shares of the world's most valuable chipmaker plunged at Thursday's open, dragging AI-related stocks lower. But the selloff quickly faded as investors turned their focus to the long-term demand tied to the technology and the potential winners emerging from the turmoil. NVIDIA Corporation fell as much as 14% early in the session before closing down 4.3%. Steve Sosnick, chief strategist at Interactive Brokers Group, Inc. Class A, said, "The market's mindset is not to assess risk but to look for opportunity." "That mindset is: 'If NVIDIA Corporation is moved aside, who wins?'" That explains the surges in chipmakers Broadcom Inc. (AVGO.US) and AMD (AMD.US)on speculation they will benefit from business NVIDIA Corporation may losewith the two leading S&P 500 gainers. The Philadelphia Stock Exchange Semiconductor Index fell 3.7% at the open, then recovered to close down just 0.5%. Patrick Moorhead, CEO and chief analyst at Moor Insights & Strategy, said, "In the short and medium term, I don't think this changes the AI trade." "When I look at Broadcom Inc., Intel Corporation and all the startups, I think they can fill many of the cracks NVIDIA Corporation may leave behind." AI-related stocks had already been under pressure in recent weeks on concerns that the massive spending on the technology is unsustainable over the long term. The midterm elections also dampened some enthusiasmwith numerous state and local candidates who oppose building data centers in their communities winning. But Wall Street professionals say solid spending commitments from AI hyperscalers through 2027 provide near-term support for the AI trade. While NVIDIA Corporation, with its top-tier chips, was one of the earliest beneficiaries of the boom and Huang was a key "cheerleader" and dealmaker for infrastructure expansion, the trend now extends far beyond a single company. Angelo Zino, senior vice president and technology director at CFRA, said, "We've come too far on AI," adding that recent AI-sector earnings show a solid demand trajectory. "I don't think Huang's departure changes any of that." Of course, Huang's departure does raise questions about where NVIDIA Corporation goes next. And given the tangled web of circular investments he built by channeling the chipmaker's profits into dozens of companies across the AI ecosystem, some of those companies could be at risk as a result. Those concerns helped drive Thursday's selloff in AI cloud service providers Nebius Group NV (NBIS.US) and CoreWeave Inc. (CRWV.US). In addition, server maker Super Micro Computer, Inc. (SMCI.US) tumbled 11% following reports that the U.S. Department of Justice is investigating Alice Huang to determine whether entities connected to her were involved in smuggling the company's products. Brian Colello, equity strategist at Morningstar Investment Service, said, "When it comes to Huang having partnerships with, or supporting, or even investing in small companies that benefited from the 'Jensen Huang endorsement,' that endorsement will no longer exist." Costello added that Huang was one of the key faces of AI and a respected technology evangelist. To some extent, "there will be a vacuum in leadership when it comes to waving the flag for AI and preaching its benefits. NVIDIA Corporation's new leader will take on that role among his or her many responsibilities, but that could be bad for AI sentiment," he said. Still, NVIDIA Corporation's swift removal of Huang and appointment of Chief Financial Officer Colette Kress as interim CEO may have helped ease some of Thursday's selling pressure. Nancy Tengler, chief investment officer at Laffer Tengler Investments, said, "One thing I've learned in this world is that everyone is replaceable." "I don't think this has a material impact on the overall AI trade. I think it's just an unfortunate little episode for NVIDIA Corporation shareholders." That largely sums up Wall Street's collective shrug at Huang's departure. Whatever happens to a single companyeven if it is the world's most important AI companyAI as a stock market theme is not going away. Alan Bond, managing director and portfolio manager at Jensen Investment Management Inc., said, "AI is a transformative technology. That won't change. And there is a lot of uncertainty around AI, but one thing seems very clear: AI requires massive computing power, and that is extremely expensive." "We believe this infrastructure cycle will continue."