Nvidia president and CEO Jensen Huang's affair with alleged Chinese spy Alice Huang already triggered a company investigation that could topple the world's most famous AI ambassador. But given the GPU giant also makes up more than 6% of the entire S&P 500, behind only Apple, investors are rightly wondering what the fallout means for their portfolios.
Nvidia stock dropped 6.39% on Monday morning following the Sunday letter Huang sent to employees apologizing for the affair (without mentioning the other party), and reaffirming his commitment to the company.
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The company didn't respond to Moneywise's request for comment, but a spokesperson reiterated that the news "will not slow Nvidia," while the board said they have "no reason to believe" that Nvidia secrets or national security were compromised.
They also, however, have no succession plan for Huang, whose job hangs in the balance and whose ouster, Reuters warned , could lead to "a full blown leadership crisis."
Could Nvidia's leadership woes become a problem for your portfolio?
Escalating concerns over the pace of AI already caused Nvidia's stock to take a 22% hit last month. It remains the world's second-most valuable company, at $4.5 trillion, however, as its AI chips are central to the global data center buildout.
Yet given Fidelity's note that the 10 largest stocks, including Nvidia, "accounted for nearly 40% of the S&P 500 Index" in June, many investors may not realize how tied their portfolio is to the company's fortunes.
Investigations, of course, still need to be completed — which could include fresh scrutiny from the incoming Democrat-controlled Senate and Congress.
But Gary Black, managing partner with The Future Fund LLC, wrote on X that, while he doubts Huang will remain as Nvidia CEO and has no successor, he doesn't "see long-term value impairment." He acknowledged, though, that "many portfolio managers will reduce their Nvidia holdings in the coming weeks as a result of uncertainty" over the situation.
Yorkville Ives tech analyst Dan Ives wrote that the potential for Huang's removal "will add risk to the stock" given his importance to the company, while analyst Tristan Gerra of Baird told CNBC that the U.S. government could restrict the company's dealings with China as a result.
Still, CNBC reported that Baird and multiple other analysts are hedging their bets that Nvidia stock will outperform by up to $500, with one noting that, despite the headlines, "The AI movement will march on and Nvidia has the best allocations to serve it."
To be safe, however, FINRA says a look "under the hood" of your ETFs and mutual funds offers a better understanding of your exposure levels to potential volatility around any given stock — after which you can speak with a financial advisor to discuss how to best protect your portfolio.
Beyond that, investors will have to wait for investigations to play out before the true impact of this scandal on Nvidia's stock price, and their own portfolios, is known.
"As an investor I want to know whether anything has compromised NVIDIA's technology, damaged customer relationships or affected its ability to do business and grow earnings," analyst Steven Fiorillo wrote on X . "Those are the questions that matter for the stock and for the people whose savings are invested in it."
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This article originally appeared on Moneywise.com under the title: Nvidia is about 6% of the S&P 500. If Jensen Huang is ousted, there's no clear successor — could chaos hit portfolios?
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
