Here’s What Nvidia Investors Should Be Focusing on Now. Hint: It’s Not Jensen Huang’s Affair

Dow Jones
2小時前

Jensen Huang’s affair with an alleged Chinese spy is not the most important factor investors should take into account when assessing whether to bet on Nvidia’s stock.

That’s saying something, since the company lost around than $350 billion of market cap Monday in the wake of this weekend’s revelations about Huang’s affair. That loss exceeds the total market cap of all but 28 publicly traded American corporations.

Nevertheless, according to Gautam Mukunda of Yale’s School of Management, Nvidia’s future success depends far more on the outlook for the AI trade than on whether Huang is able to survive the legal and regulatory scrutiny that’s coming his way.

In an interview, Mukunda argued that Nvidia’s stock is a good bet to beat the market in coming years — if AI lives up to the huge potential that its cheerleaders and true believers argue. However, if the AI trade is in a bubble that is about to burst (which may have already started deflating), then Nvidia’s stock will suffer huge losses having nothing to do with Huang’s scandal.

Bloomberg columnist Matt Levine on Monday gave context. “In about five years, people and companies will be spending about $4 trillion a year on artificial intelligence. Give or take! Perhaps it will be $3 trillion, or $5 trillion. Perhaps it will take six years to get to that level, or four… But the center of the distribution might be something like ‘in five years, $4 trillion a year on AI, give or take.’ And then on crude simple assumptions a cash flow of $4 trillion a year is worth something like $40 trillion in present-value terms, which is on the order of half of the value of the U.S. stock market today.”

If Nvidia is able to capture an outsized portion of that total, as seems likely given the institutional advantages it has over other chipmakers, then Mukunda believes losing $350 billion of market value because of a sex scandal may not be a good reason to avoid the company’s stock.

Mukunda added that his assessment is not a judgment on Huang’s remarkable tenure at Nvidia, saying that we shouldn’t “underestimate Huang’s many priceless contributions to Nvidia.” Mukunda is confident that, without Huang, the company would be worth far less than it is currently, if it even were to exist at all.

Nevertheless, Mukunda added, “now may be a good time for Huang to consider retiring in any case” — apart from his affair. That’s partly because Huang will be spending thousands of hours with lawyers over the coming years to deal with the mess his affair will cause. But it’s also because the AI trade is facing some stiff headwinds that heretofore it had largely avoided. Even before Nvidia’s $350 billion haircut on Monday, the company had shed around $1.3 trillion in market cap just since early October.

Mukunda stresses, however, that he’s “not saying he [Huang] should retire because he’d be bad at the job.” Instead, Mukunda is saying “hey, he’s 60, he probably wants to enjoy life a bit more and the next couple of years aren’t going to be great no matter what happens.”

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