Breakfast News: What’s Nvidia’s Biggest Risk?

1. Nvidia Board Set to Oust CEO

Nvidia (NVDA +2.87%) fell over 6% in pre-market trading after the WSJ reported that the board is preparing to oust co-founder and CEO Jensen Huang. Bloomberg Law further reported that the board is working with an outside firm to find successors and is weighing a temporary chief.

• The story so far: On Sunday, Jensen admitted to an affair with Alice Huang, an alleged spy and a former executive at Singapore-based Nvidia customer, Megaspeed. Nvidia’s board announced an independent probe and said it has “no reason to believe that either national security or Nvidia secrets were compromised.” Yesterday, the New York Times reported Jensen also had an affair with Nvidia vice president of healthcare, Kimberly Powell.
• The enormous succession problem: Jensen has led Nvidia since co-founding it in 1993. He has roughly 60 direct reports and no named successor. That lean structure helped him build a fast-moving business – but it also concentrated strategic decision-making in one person. Nvidia’s own proxy filing warns that inadequate succession planning could hurt its long-term prospects.
• The leadership gap could run deep: Nvidia can keep shipping GPUs without Jensen tomorrow. Replacing his technology foresight, plus his ability to cultivate hyperscaler relationships and negotiate with world leaders, is much harder. Washington’s export-control policies increasingly shape Nvidia’s addressable market. TMF co-founder and CEO Tom Gardner believes Jensen will be ousted “95%+ because of the national security issue.”

Nvidia’s artificial intelligence (AI) dominance hasn’t suddenly disappeared, but its key-man risk is real. The Nov. 17 quarterly earnings report and conference call may be among the most closely watched in the company’s history.

2. What Apple After Steve Jobs Teaches Nvidia Investors

During a special Fool24 session last night for members, Team Rule Breakers analyst Dan Caplinger compared the situation at Nvidia to a familiar case, and added a warning.

Think back to when Steve Jobs handed Apple (AAPL +2.04%) to Tim Cook. It looks like an easy call now, but it didn’t feel that way at the time. “Don’t forget just how uncertain things were at the time,” Dan reminded Fools.

• The market doubted Apple: “For a long, long time, you had Apple shares trading at ridiculously cheap valuations,” Dan said. Many investors expected customers to drift away from Apple products once Jobs was gone.
• Dan, Foolishly (capital F!), disagreed: He thought the market was underestimating the Apple ecosystem, so he bought. Apple went on to become one of his best-performing positions. The strength of the franchise made it a good buy. The leadership change had little to do with it.
• Nvidia’s case is different: Apple spent years preparing Cook for the job. Nvidia has no known successor. Tom noted Apple was a smaller company in a broken market. Nvidia is the world’s largest company in a healthy one.

Nvidia may come through this in good shape. Even so, shareholders will probably face months of open questions. Investors who can live with that uncertainty and stay focused on the business will be in a better position to make clear decisions, whichever way this goes.

3. AMD and Broadcom Rise as Nvidia Fumbles

Nvidia shares fell, but Advanced Micro Devices (AMD +7.32%) rose more than 4% after hours Wednesday while Broadcom (AVGO +3.99%) gained over 2%. Investors are already weighing who could benefit if Nvidia loses its longtime leader. Both stocks are recommended by Team Hidden Gems and Team Rule Breakers.

• Ready to cash in: AMD competes with Nvidia in AI accelerators, and Broadcom designs custom AI chips and networking equipment for hyperscalers. They’re natural contenders for a bigger slice of the market. Both have their own growth engines, including AMD’s deals with OpenAI and Anthropic and Broadcom’s partnerships with Alphabet (GOOG +2.00%) and Apple. AMD has beaten the S&P 500 by 154% since Team Rule Breakers recommended it in January 2024 in Stock Advisor.
• The AI spending spree holds: CoreWeave (CRWV +24.71%) also gave AVGO and AMD stocks a lift as its numbers eased concerns that debt-funded AI build-outs would backfire if demand slows. The Nvidia-backed cloud provider reported a 168% jump in third-quarter revenue and lifted its full-year outlook. Shares surged nearly 25% Wednesday but were down around 6% in pre-market trading.

Nvidia may have a Jensen problem, but its rivals could suddenly be looking at a bigger market opportunity.

4. Buying in Thirds Beats Waiting on the Sidelines

Team Rule Breakers

Say you’ve set aside $3,000 for a stock. Split it into three $1,000 pieces. Buy the first today.

Buy the second on the same date next month or next quarter, at whatever price it trades. Buy the third one period later, on the same terms.

Because the next move can’t be reliably predicted, the method doesn’t ask you to try. The calendar decides when you buy.

If prices rise, part of your money is already working. If they fall, your remaining thirds will likely buy cheaper and bring down the average you paid. Motley Fool co-founder David Gardner calls the approach “an incredibly effective win-win way to get invested in any volatile stock that’s trading high.”

• The cost is small: U.S. stocks have historically risen in more years than they’ve fallen. Money held back can sit idle while prices climb. That’s why studies suggest investing everything at once has tended to come out slightly ahead.
• No schedule can improve the company itself: If a business is losing customers or burning through cash, spreading out your purchases just means owning that problem at three prices.

We think buying in thirds is worth its small cost when two things are true. You believe the company will be worth meaningfully more three or more years from now. Without a plan, you’d keep waiting or put everything in at once on a hunch.

5. Today’s Question!

What’s a stock you stuck with through the doubt – and were glad you did?

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