The scandal involving Jensen Huang, CEO of NVIDIA, has sent shockwaves through the investment community, particularly among retail investors. NVIDIA is the second most popular stock among South Korean retail investors, following Tesla, with approximately 800,000 individual shareholders. Amid concerns over artificial intelligence (AI) profitability and a decline in stock prices since last month, the recent scandal has heightened fears of further losses.
According to financial industry sources, NVIDIA's stock price dropped by 4.27% in just one day following the revelation of Huang's scandal. This decline resulted in a loss of approximately $192.1 billion (about 260 trillion won) in market capitalization.
Domestic investors are increasingly anxious. According to the Korea Securities Depository, NVIDIA ranks as the second favorite stock among South Korean retail investors, with around 800,000 individuals holding shares worth an estimated $15 billion to $17 billion (about 20 trillion to 23 trillion won). The recent drop of over 4% is expected to result in direct evaluation losses of around 1 trillion won for these investors.
The impact extends beyond individual stocks, as many exchange-traded funds (ETFs) linked to NVIDIA are also suffering. There are 153 ETFs listed on the Korea Exchange that track NVIDIA, with an estimated total investment of about 8.5 trillion won.
For instance, the ACE NVIDIA Bond Mixed Fund, with assets totaling 197.9 billion won, has a 30% allocation to NVIDIA. Other funds, such as TIGER U.S. AI Semiconductor Fabless (28%), KODEX U.S. AI Semiconductor TOP3 Plus (26.3%), ACE NVIDIA Value Chain Active (25.9%), and 1Q NVIDIA Fixed U.S. AI Semiconductor (25.8%), also have significant NVIDIA exposure. While the degree of fluctuation varies based on the fund's NVIDIA allocation and recent adjustments in AI semiconductor stocks, analysts warn that the ongoing scandal could negatively impact short-term returns.
Concerns are growing that Huang's scandal may not be resolved quickly. If allegations that his affair partner is a Chinese government spy are confirmed, it could escalate into a broader security debate regarding U.S.-China relations in the context of AI dominance. Should this scandal lead to increased U.S. semiconductor regulations against China, further declines in NVIDIA's stock price are anticipated. Additionally, any changes in governance centered around Huang during the investigation could pose further risks.
Despite the scandal, many in the U.S. investment community are maintaining their ratings and price targets for NVIDIA. However, some analysts caution that the repercussions of the scandal may linger for some time. Bernstein noted, "The fallout from this scandal is likely to continue for a while." Clear Street expressed concerns that uncertainty surrounding NVIDIA's governance could compound fears about the return on investments in AI infrastructure.
Seo Sang-young, an executive at Mirae Asset Securities, stated, "As the board begins a formal investigation into CEO Jensen Huang, we expect the stock price to experience significant volatility until the allegations are resolved. Regardless of any potential leaks, uncertainties regarding the CEO's position and semiconductor export regulations to China could impact AI semiconductor stocks in the medium to long term."
* This article has been translated by AI.
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