The stock fell as much as 10% in postmarket trading in New York. Shares began to drop following a New York Times report that the CEO had a relationship with one of his direct reports. Losses extended after the Wall Street Journal said Nvidia’s board is preparing to oust him. Huang admitted over the weekend that he had a separate affair with an alleged Chinese spy.

Wall Street sentiment toward Nvidia Corp. is starting to crack. Bernstein was the latest firm to downgrade the stock, cutting its rating to market perform from outperform while lowering its price target to $200 from $400. Baird earlier downgraded the shares to neutral, while Morgan Stanley removed them as a top pick.

If Nvidia’s postmarket losses hold, the stock is set to fall below $4 trillion in market capitalization when cash trading resumes.

“We admit to struggling mightily with this call, and can sympathize with the case to buy the dip,” Bernstein analysts including Stacy Rasgon wrote in a note. “But our gut tells us that we probably haven’t yet fully probed the depths of what might be found here. We’ve had enough, and prefer to watch from the sidelines.”

Other artificial intelligence-linked stocks followed shares of Nvidia lower in postmarket trading. CoreWeave Inc. slid more than 5%, Intel Corp. and Dell Technologies Inc. each fell 3% and Super Micro Computer Inc. declined more than 4%.

Nvidia is scheduled to report its quarterly results on Nov. 17.

“It is going to be a very challenging situation,” said Michael O’Rourke, chief market strategist at JonesTrading. “Jensen had forecast 70% sales growth this year. With the vendor financing and the aggressive tactics, his successor will spend the next year putting out fires and cleaning up messes.” .

Here’s what investors and strategists across Wall Street are saying:

Matt Maley, chief market strategist at Miller Tabak + Co

“This second shoe to drop is likely going to force the board’s hands. It looks like he’ll be lucky to survive the week after this disclosure.”

“The issue that worries me the most is that Nvidia is such a large financier for the AI industry. Will these developments cause them to pull in their spending some what?”

Haris Khurshid, CIO at Karobaar Capital

This is starting to look less like a one-off personal scandal and more like a broader question around him, governance and key man risk. The China angle obviously makes it much more serious, and the additional reporting around other relationships adds another layer. Given how closely he’s associated with Nvidia’s strategy and relationships, I think the market is having to reprice more than just the headline scandal.”

Brian Mulberry, chief market strategist at Zacks Investment Management

You could maybe see a path forward for him to be a part of the board, but not CEO, because his strategic vision is so important to what happens next in terms of innovation, research & development, and then honestly execution.

He could be reprimanded and not remain CEO, but still be a strategic vision advisor, board member.

David Meier, senior investment analyst at The Motley Fool

Frankly, I am a little surprised how quickly these stories have come to light. And the board is going to have to act quickly now to do its investigation of the situations. Jensen is the key figure at Nvidia. He’s structured the company for him to be the main decision maker. If the risk he’s going to be terminated is rising, that’s material. And the board needs to communicate to shareholders about this right away.

Joe Gilbert, portfolio manager at Integrity Asset Management

This is an unequivocal negative for Nvidia and the entire AI ecosystem. He is not only the face of AI but arguably the architect of the AI infrastructure. Now the company will need to get a new face of the company out there and that person will have to prove that they are competent. Even with this, it will be difficult if not impossible to replicate Jensen’s vision.

Gary Tan, portfolio manager at Allspring Global

Nvidia’s latest developments could weigh on sentiment across the broader AI trade, but we see selective opportunities emerging among semiconductor companies that can offer credible second source alternatives for critical AI chips. Near term, however, investor reception to Anthropic’s IPO is likely to be a more important driver of AI sentiment.

Any near term demand air pocket from Nvidia will be absorbed by competing AI chipmakers, while tight memory supply near term should continue to support pricing and earnings visibility.

Charu Chanana, chief investment strategist of Saxo Markets

Investors now have to put a higher probability on a leadership change at Nvidia. Some of the stock’s premium reflects confidence in Jensen Huang’s ability to set the direction of the AI industry. Uncertainty over who carries that vision forward, and what happens to Nvidia’s China strategy, could weigh on valuations even if earnings remain strong.

While a recovery in the AI trade was just starting to brew, but this raises the bar for the AI rally to regain momentum. Strong demand signals are reassuring, but they cannot fully offset uncertainty at the company at the center of the buildout.

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