Why Nvidia Stock Fell Again on Tuesday
Key Points
The Nvidia saga is growing more complex.
The FBI is now investigating Nvidia, and Democrats are likely to initiate a Congressional inquiry.
Nvidia will report third-quarter earnings next week, which could shed more light on the ordeal.
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Shares of Nvidia (NASDAQ:NVDA) were sliding again today as investors continued to react to news that CEO Jensen Huang had an affair with a suspected Chinese spy.
The revelations came out over the weekend, and Nvidia announced that it would investigate the matter and published a letter from Huang to employees apologizing for the behavior.
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Today's sell-off comes as the federal government is now preparing to investigate the matter as well. As of 11:04 a.m. ET, the stock was down 5%, hovering near its 52-week low.
Image source: Getty Images.
The Nvidia investigation expands
This morning, President Trump said the FBI is investigating Huang's relationship with the purported spy, Alice Huang (no relation), who was an executive at a Singapore-based data center company, Megaspeed.
Additionally, The New York Times had reported that an inquiry that began with the Commerce Department was transferred to the Justice Department after Nvidia intervened in the case.
It's the latest evidence of the tangled web in which Nvidia now finds itself, as the company had become deeply influential in government, partly in a bid to advocate for looser chip export rules.
Investors are likely to see more reporting come out on Nvidia, especially as Democrats, newly empowered from the midterm election, are calling for investigations into Nvidia.
What's next for Nvidia
The timing of these revelations comes just a week before Nvidia is set to report third-quarter earnings. It's unclear if we'll hear any kind of update at that time, or if the call will just focus on the business.
After falling roughly 10% over the last two sessions, Nvidia stock does look cheap, but shares deserve to trade at a discount while investigations are ongoing, as Huang could be made to step down, or restrictions or fines could be imposed on the company. Any findings could also make it harder for Nvidia to export its chips to countries like Singapore.
At this point, it's easy to speculate about potential consequences, but investors will have to wait and see how the story develops. Next week's earnings report could offer some clues.
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Jeremy Bowman has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
