Nvidia stock rose 3% on Wednesday after falling sharply over the previous two days. Shares dropped 5.47% on Tuesday and 4.3% on Monday as details emerged about CEO Jensen Huang's alleged affair with a Chinese spy.
The company announced Tuesday that it hired law firm Wachtell, Lipton, Rosen & Katz to investigate whether company secrets or national security were compromised. Huang returned to the office Monday and continued meetings Tuesday, ahead of Nvidia's quarterly earnings report on Nov. 17.
Bank of America outlined three possible scenarios in a Tuesday note. In one, the impact stays contained with leadership continuity. In another, prolonged uncertainty pressures valuation before earnings. In a third scenario, "adverse findings, leadership disruption or tighter restrictions" could require earnings reassessment, analyst Vivek Arya said.
Zacks Chief Equity Strategist John Blank told CNBC that the selloff reflected two concerns: that the U.S. might impose further restrictions and that more problems could emerge. "It's not good for Nvidia. It's not good for Jensen Huang. It's certainly not good for the AI trade," Blank said.
Morgan Stanley removed Nvidia from its top picks list on Wednesday after shares fell more than 25% since Oct. 2. The firm's analysts noted that Huang's leadership is crucial to the company's strategic direction.