Bernstein: Why You Absolutely Shouldn't Buy the Dip on Nvidia Right Now?

Wall Street's top brokerage Bernstein has downgraded Nvidia's stock rating from "Outperform" to "Market Perform," slashing the target price from $400 to $200. The trigger for this downgrade is not a deterioration in fundamentals, but a management scandal that has swept through the company's highest levels and is still unfolding.

Currently, the scandal surrounding Nvidia's CEO Jensen Huang is spreading, with the company's board announcing an independent investigation. The Wall Street Journal further reported that the company is preparing to terminate him. Bernstein analyst Stacy A. Rasgon bluntly stated in the report: In light of the new allegations, it is almost impossible for the board to allow Huang to remain; even if he stays, the ongoing risk of exposure cannot be ignored.

Against this backdrop, Bernstein believes that despite Nvidia's stock price having fallen to a "nearly absurdly low valuation" level, it strongly advises investors to remain on the sidelines for now. The company's fundamentals are sound, but uncertainty has not yet cleared—where the bottom of the negative news lies is currently impossible to determine.

Scandal Continues to Unfold, Board in a Difficult Position

The catalyst for the event was a media report that emerged last weekend: Huang had an inappropriate relationship with Alice Huang. Jensen Huang publicly acknowledged this relationship on Sunday, and Nvidia's board immediately announced the initiation of an independent investigation.

However, the situation quickly escalated. According to the latest reports, Huang also had an inappropriate relationship with a direct subordinate, reportedly Kimberly Powell, the vice president of the company's healthcare business. Nvidia is currently preparing to oust her.

In this regard, Bernstein assesses: Some CEOs have been terminated for far less serious reasons. After the new allegations surfaced, the likelihood of the board retaining Huang is extremely low; if the board chooses to remain inactive at this time, it means that more scandals emerging is just a matter of time, and the risks will further accumulate.

Fundamentals Are Sound, But Uncertainty Cannot Be Priced

Bernstein emphasizes that this rating downgrade is not due to a pessimistic judgment about Nvidia's business prospects. According to its latest forecasts, the company's data center business growth trajectory remains steep—with data center revenue expected to be approximately $378.3 billion in fiscal year 2026, further climbing to $657.8 billion in fiscal year 2027, and potentially exceeding $918.2 billion in fiscal year 2028. Overall revenue is expected to grow from $406.9 billion in fiscal year 2026 to $690.3 billion in fiscal year 2027, with an annual growth rate of nearly 70%. In terms of earnings per share, Bernstein expects an average non-GAAP EPS of $19.04 for fiscal years 2027/2028 (FY28/29), setting the target price at $200, corresponding to about 11 times the forward P/E ratio, significantly lower than the previous 21 times valuation multiple.

The report points out that during the management transition period, the company's daily operations should not be significantly disrupted. However, what truly troubles analysts is the successor issue. "Internal promotion or external hire? Who can they find to take over Huang's position?"—these questions currently have no answers, and any emergence of answers will bring new variables to the market.

"Cockroaches in the Kitchen": Negative News May Not Have Bottomed

Bernstein used a vivid metaphor in the report to illustrate its core logic: If you find two cockroaches in the kitchen, the most reasonable inference is not that there are only two cockroaches in the entire kitchen.

Based on this judgment, analysts believe that the current emerging scandal is likely just the tip of the iceberg. What may follow includes not only more internal allegations but also potential government investigations, as well as a series of uncertainties at the business level triggered by this—such as the fate of Nvidia's previous strategic investments in the supply chain, various guarantees, and remaining commitments, all face suspense. Meanwhile, some competitors' stocks have recently risen due to related news and may continue to benefit.

Rasgon candidly admitted in the report that he himself is "quite conflicted" about this judgment and fully understands the logic of buying the dip. But his intuition tells him that the depth of this well has not been fully explored. For this reason, Bernstein chooses to temporarily withdraw and observe from the sidelines.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.