Nvidia Stock Gets Rare Downgrade: Baird Slashes Target 60% on Jensen Huang Scandal

Baird downgraded Nvidia Corp. (NASDAQ:NVDA) on Wednesday, pointing to fallout from CEO Jensen Huang’s admitted affair and signs of slowing AI spending by hyperscalers.

Baird analyst Tristan Gerra cut the rating to Neutral from Outperform and lowered the price target to $200 from $500, according to CNBC. The new target still implies roughly 18% upside from Tuesday’s close.

Few firms share Gerra’s caution. According to Benzinga Pro, 25 of the 26 analysts covering Nvidia rate the stock a Buy or Strong Buy.

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The Scandal Behind the Call

In an email to Nvidia staff on Sunday, Huang admitted to an affair with a woman suspected of spying for China and said Nvidia’s board of directors had opened an independent investigation into the spying allegations.

The board said it has no reason to believe national security or company secrets were compromised, though its inquiry will review all available information. A company spokesperson said Huang intends to continue as CEO without interruption.

The woman involved, Alice Huang, is not related to the CEO. She became the controlling shareholder of Megaspeed in March 2023, Reuters reported. Nvidia lists Megaspeed as an official cloud partner on its directory.

What Baird Expects

Gerra wrote the Neutral rating will likely remain until Washington decides how to respond. The analyst sees several probable consequences.

"A new ban on H200 exports to China," the analyst predicted. "We believe low-level shipping is taking place into Asia-based warehouses with some inventories awaiting China demand. We estimate this could translate into a $5B write down."

Gerra also expects new export limits targeting Southeast Asia data center loopholes, plus possible Department of Justice action against Megaspeed.

U.S. demand could eventually offset lost Southeast Asian sales. The analyst cautioned the timing may not line up.

"Revenue impact could be concentrated in a given quarter with cash flow constrained hyperscalers not able to pick up the slack within that given quarter," Gerra wrote.

Gerra’s second worry centers on AI infrastructure spending. He estimated hyperscaler capital expenditures could rise only 40% year over year in 2027, a sign demand may be cooling.

The analyst stopped short of predicting a deeper collapse, however.

"While some of these concerns are already embedded in Nvidia’s valuation, we think stock will at best stay in a trading range until the dust settles," Gerra said.

Wall Street remains largely bullish. The consensus price target of $336.15, according to Benzinga Pro, implies upside of about 92% from Wednesday’s premarket price.

NVDA Stock Price Action: Nvidia shares fell 5.47% to close at $168.89 on Tuesday and sit about 30% below their October high, per Benzinga Pro. Nvidia stock was up 3.49% at $174.79 in premarket trading at the time of publication Wednesday.

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