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The speaker introduces the shocking leadership crisis at Nvidia and the steep stock decline that followed. He frames the video as a look at whether the sell-off is a warning sign or a buying opportunity.
Well guys, it is looking like uh basically the end of a legacy here for what was once one of the most admired CEOs in all of big tech.Uh with Jensen Hang now officially having resigned from the CEO position of Nvidia, the king of the entire really AI revolution.Uh talking about Nvidia as a company and um really we got to talk about all the chaos that is just surrounding them.Now, we got to talk about the stock.Now, um if you've been watching the stock, well, you know that really over the past month or so, um it has been going through just a downright brutal stretch of falling even further after the midterms, having now lostwell over a third of its entire value.really just like in the past month alone as a wave of shocking headlines just completely hijacked the stock and just kept you know coming in felt like every day one after the other.
Now, between the blue wave in the midterms that, you know, many fear could put a bit of a halt on data center expansions to the board launching an independent investigation into the CEO, Jensen Hang, who admitted to havingan affair with a former executive of an overseas chip company to reports of uh reports alleging billions of dollars in restricted chip smuggling.And now, of course, breaking reports of a second alleged affair.Who knows if maybe there could be more in the future that we find out about.I don't know.I'll just, you know, that would just be speculation.But if there's already been two, it's I wouldn't be all that surprised if we end up seeing more eventually.But regardless, um the fact is that uh that has now been basically revealed and as a result it uh basically forced Jensen Huang to officially resign uh from the CEO position effective immediately with the CFO Colette Crest now
stepping in as interim CEO.Well, through it all, investors are rightfully so panicking a bit ahead of their crucial, now even more crucial earnings report that is coming on November 17th.That was already going to be very, you know, important, now it's going to be uh much more vital to to where we head from here with the stock.So look now, personally, while I do agree that uh these are very serious concerns here to obviously never be taking any of this lightly, I also just can't help but feel that through all of this selling and fearthat we're going to be going through now, and especially with how much the stock just continues to plummet here, I can't help but feel that Wall Street is going to end up ignoring ing what is still one ofthe best money printing machines out there and one that is now trading at some shockingly low and very attractive multiples on the valuation.
So look, as an early investor in Nvidia stock myself, I might be a little biased again.You know, I' I've been investing in Nvidia for a long time.It is one of my largest holdings and I I really plan to invest in them long term.Well, you know, as someone that does plan to continue holding and even buy more on this dip, you know, especially if it continues to fall deeper, I do plan to buy the dip.I do plan to buy more the the lower that the stock goes.Well, I think that I should probably address all of these concerns, you know, head on and uh just kind of share my thoughts with you on the whole long-term bull thesis here.if if I think it still holds up uh when looking out into the future or if these are just too big of concerns to really weigh on them um you know looking years out.
So um let's talk a little bit today about what history tells us about a sudden leadership scare like this at least to some degree.Um we'll break down why the underlying business here is still dominating.We'll discuss other concerns too, like the midterms, rising chip competition, and overall, we'll just try to determine uh whether this huge sell-off is perhaps a value trap or perhaps a great buying opportunity to take advantage of the deeperthat it sinks for the longer term.All right, smash that like button.Make sure you subscribe.Let's go ahead and jump into it.
This section explains the board investigation, the alleged affairs, and the national security concerns tied to chip smuggling. It also covers Jensen Huang's resignation, the interim leadership transition, and possible permanent CEO replacements.
Okay, so uh let's just start with the biggest issue on everyone's mind right now.What exactly is even happening here with the whole CEO scandal, that whole situation?Well, over the the past weekend now, um Nvidia's board officially launched an independent investigation after Jensen acknowledged to having an affair with a former executive from a Singapore-based chip company called Megape.Now, that alone is obviously a pretty big deal.But where this crossed the line even further into now, you know, a giant national security issue is that US officials now alleged that Mega Speed may have acted as a front to smuggle over $7.5 billion worth of restrictedNvidia AI chips straight into China.And so now Congress is even demanding a closed dooror briefing on I believe it's going to take place on November 18th, which is literally just one day after the next earnings report release.
And as if all of that wasn't already, you know, definitely bad enough, well, the New York Times dropped another bombshell report alleging that Jensen also had a second affair, this time with Nvidia's vice president of healthcare, who doesreport directly to him.Now, unlike a national security probe that can take months to investigate, a romantic relationship with a direct subordinate is a black and white corporate governance violation.Which is why following an emergency board meeting that was held literally just last night.Well, Nvidia has now officially announced um as of today that Jensen Hong has resigned as president, CEO, and board member, effective immediately, ending his 33-year legacy run of leading the company.Now, in the meantime, Nvidia has appointed longtime CFO Colette Crest as interim CEO while the board launches a formal search for a permanent replacement considering both internal and even external candidates alongside appointing longtime director Harvey Jones as their
first ever chair of the board.Harvey Jones, by the way, I believe has been with the company for like decades.So, he's definitely experienced.He's been on the board for a long time for for that position.definitely experienced.Um, and uh, Colette Crest is also she's known for being really like a very stable kind of CFO, like very serious direct to business.So, and she's been part of all the, you know, tons of earnings calls and all that kind of stuff.So, she's very well experienced to, I think, just kind of add some stability here while you transition.You you obviously want a more tech uh, focused type of CEO, a more innovative type of CEO.I don't think you're going to get something, you know, m maybe not as good as Jensen Huang.Um, but you want to try to get as close as you possibly can to that with the new CEO.
So, we'll kind of talk about that here in just a second, too.But, um, the thing is that, you know, going back to Jensen here, he didn't actually hold any type of majority voting controls.So, the board had the full authority to basically force a change here.So, you know, yes, he resigned, but, you know, was he essentially forced to resign?you know, regardless, the point is that he he's not the CEO anymore.Well, because of the way that Nvidia was actually structured so heavily around him, around Jensen, with over 60 executives reporting directly to him and no clear number two lined up, well, Wall Street is obviously terrified of what happensnext to Nvidia without its visionary founder leading the charge.Now, as for who actually ends up replacing him permanently, again, um we obviously don't know who the next CEO will be just yet because we have to wait for the the search committee and stuff to to look around
and and see what the best options are.Um but I have already seen a few credible names thrown around like Nvidia's own CUDA co-creator Ian Buck who's currently um Nvidia's vice president of hypers scale and high performance computing.He oversees their data center, AI, hardware, and software products while managing the day-to-day relationships with their biggest cloud buyers like Microsoft, Google, Amazon, Meta, and Open AI.So, he would obviously be, you know, probably a pretty good fit in my opinion just just based on that experience and and how knowledgeable he would be with with all these kind of tech and and their most importantpieces of tech.Um, there could also be an outside hire though and I've seen some names thrown around like ARM CEO Renee Hass who had actually spent um seven years as uh a vice president at Nvidia actually before joining ARM.
So, you know, he might be someone that you consider too because of his background uh with Nvidia now with ARM and very wellversed in the in the entire space.But again, honestly, all of this is just kind of pure speculation at this point.So, it is really something that we're just going to have to wait and see how the board's official search plays out.Um, and uh and again, in the meantime, you've got you've got the CFO there just kind of trying I think just kind of trying to add a little bit of stability, which is really what you want when you'reseeing the stock price crash by so much.You're going to really want to just kind of stabilize things, you know, get the foot get the floor under you so you can just kind of move move forward and and and even try to make some better decisions
here.But you got to stabilize things first before you can even do that.
The speaker argues that the CEO change may not be the biggest long-term issue, using Apple after Steve Jobs as a comparison. He then explains Nvidia's product pipeline, talent depth, and software moat as reasons the business may remain dominant.
Now regardless though um personally I feel that um you know as we kind of progress through this this might actually not end up being the biggest concern to investors for Nvidia stock longterm.Now I will actually tell you what I think is here in just a second.What might what could even be a bigger concern.Um, but in terms of this CEO change, uh, as for me personally, how I feel about it, I I think I I would use a comparison that's been thrown around a little bit of going back to January of2011.Um, where at that time, Steve Jobs had actually taken his final medical leave of absence at Apple due to cancer, which he tragically passed away from that October.Um, but at that time, critics screamed that Apple was done without its visionary founder.But yet, during that exact same year, while the S&P 500 was completely flat and the NASDAQ even went negative, well, Apple stock actually surged by over 26% and then it went on to crush the broader market again the
year after as well.Now, why is that?Well, it's because when you're looking at mega cap tech, the product pipelines that a visionary founder is currently building out, those are already going to be locked in place for years to come.The development team is set, the innovators are in line, and the business is already pumping.Well, I don't think Nvidia will actually be a whole lot different.Uh Nvidia has some of the best talent in the world working there.And look, whether you're talking about the Vera Rubin architecture, the entire pre-built AI server racks that they're offering now, or even the brand new CPU chips that are targeting an entirely new market, these are already engineered.They're starting to ship, and they're backed by billions of dollars in customer orders.So, you know, make no mistake, Jensen is a generational talent in both business and engineering vision.
So, as an investor, you know, obviously, it's tough.It's very very tough to see him step down under these circumstances um after everything that he's built.But regardless, even without him steering the ship at this point, you know, Nvidia already has a worldclass extremely deep bench of talent and this business is gigantically larger in my opinion than just one single person.anything can happen of course and again I do actually think that the bears are set to win the short-term narrative here but longer term there's actually other issues that um you know at least on the surface are maybejust as important here now for example there was the whole political fallout from the midterms where uh you know new Democrat leadership has openly campaigned on halting AI data center expansions to make way for new regulations and negotiationsand there's even a potential rise in competition from hyperscalers that are now looking to design their own custom chips, too.
And all of that can can weigh on the stock as well.Well, I recently addressed both topics in last weekend's video where I covered Nancy Pelos's five largest holdings, one of which is Nvidia.So, if you want to watch that entire deep dive, I'll have it linked for you uh up here and down in the description.But just to give you the short version of it, when looking at the political side of things, well, regardless of anything that happened during the midterms, we have to acknowledge that AI is quickly becoming one of the mostcritical national priorities where both parties know that if America taps the brakes on data center infrastructure, global rivals will be very happy to fill that void.And I'm sure a lot of them are are well, I'm sure China is probably um actually maybe a little happy that all of this is happening to Nvidia because it opens the door for more competition.
But um at this point that AI is so critical that America has to stay at least try to stay at on top as much as they can.And even at the local kind of state levels where where we have these new governors now um elected.Well, I still find it very hard to believe that states are going to suddenly handicap their economies by outright banning massive data centers that could generate some of the biggest tax revenue that they could ever hope to collect.So rather, I think they're just going to simply negotiate better deals.They'll add power restrictions where necessary.They'll hopefully take into account the impact on local communities, which I think it should really be the top priority above everything else.And then they'll very likely just kind of proceed at, you know, forward as planned.And even where they can't come to some agreement, I just think these giant very well experienced companies will simply adjust themselves and find new locations that allow them to to build on.
Now on custom chips, that too could potentially grow into a larger concern.And it's scary now, you know, being led without Jensen Huang having to deal with hyperscalers now trying to build, you know, their own custom chips.It's something that I think we're going to have to for sure monitor and keep an eye on if you're invested in Nvidia.It's something that you definitely don't want to dismiss.if you want to keep an eye on it.But even there, I still just feel that in-house silicon, it's something that takes years to design.And at during that time, cutting edge AI models are evolving every few months.So for frontier training, tech giants still need Nvidia's current speed and faster um updates and and their flexibility.And all the meanwhile, you know, all their e external cloud customers, they all basically write their code directly on Nvidia's proprietary CUDA software platform.
So if a cloud provider ever tries to ditch NVIDIA, their customers will simply pack up and move to another provider that does still offer it.And that's a software mode that I think kind of maybe to at least a little bit a certain degree keeps the entire industry kind of locked in place here.So, it's definitely a very valuable moat for Nvidia to to hold.
This chapter focuses on Nvidia's explosive financial performance, compressed valuation, and bullish analyst expectations. It also warns that earnings, legal fallout, and sentiment could create major short-term volatility.
Well, all of that dominance is now translating to some unbelievable cash flow numbers for the smaller price that we actually get to pay with these bigger dips in the price in the stock price.Now, last quarter, for example, revenue more than doubled in size with data center sales surging over 117% at a giant 75% gross margin with over $21 billion of pure free cash flow in just 3 months time.And looking ahead, these are numbers that only continue to get stronger per each new generation that they release.Plus, they're not just selling loose GPUs anymore, but they're actually offering full server racks featuring their brand new Vera CPUs, too.and that's taking direct aim at a $200 billion CPU market that used to only belong to Intel and AMD.So, while they may face some rising competition from hyperscalers in the future, they're also expanding and trying to steal market share for themselves, too.
Well, when you combine that explosive growth with the big drop in price, the valuation has been compressed to a rare bargain.Revenues, for example, are projected by analysts to more than double every couple years, happening this fiscal year, in fact, and then doubling again a couple years later to more than 900 billion in sales, leaving them with insane operatingincome of over 600 billion and still about half a trillion of pure net income, too.Well, that would translate to a P ratio of only less than eight.And it even gives them a PEG ratio today, price earnings to growth, of only less than 0.4, which is over 60% cheaper than the sector median.And Wall Street knows this, too.It's why of the 62 analysts covering the stock, the average price target would see it nearly double over the next 12 months with even the lowest, most bearish analysts still projecting it to climb a little from today's being
down levels, too.Now, look, heading into earnings on November 17th and with the closed door house briefing the very next day on the 18th, um you got to expect some near-term volatility here to happen.I don't care how cheap the stock is.I don't care how low the valuation is.This is very easily a stock that can absolutely head much lower from here.I think it'll be very volatile.I think there could also be swings to the upside, too, on any kind of positive news, especially if they find a great new CEO.if um the legal repercussions aren't as bad um from everything that happened with the whole chip smuggling and all that kind of stuff, there are there are catalysts that could send the stock higher, but there are also catalyststhat could easily send the stock lower too if there are in fact any legal repercussions if they do um put uh you know some kind of ban on Nvidia's business to anything to do with China, you know, even
directly or indirectly because who knows what's been going on there.But yeah, anything that could potentially hurt Nvidia's business even more.Um, if the whole CEO change faces any kind of friction, if the market doesn't like who they end up choosing.I mean, there's just several things that could easily create very negative headlines that the media could easily run with and the market could just eat up all of that negativity and for sure send share prices lower.Um, so you know, cuz it's not always about the valuation.It's definitely the market moves on sentiment as well and and other things.So there's just a lot of things that we have to keep in mind here.And I I I'm just telling you, you've been warned.Um, expect volatility.That's all I'm saying.Expect volatility.It's impossible to predict what happens here in the short term.
In fact, um, historically, Nvidia stock actually fell immediately after earnings in eight of their past 13 reports, including the last four quarters in a row.And look at how phenomenal the their business has been during that times.Yet, the stock actually fell after reporting.And the reason why is because when it comes to the biggest companies in the world that get this much attention, the market just tends to demand absolute perfection from them.So, it wouldn't surprise me at all if bears do actually win the short-term narrative here over the next few weeks or even months.
The speaker closes by saying he is buying the dip despite the risks, while emphasizing that viewers should do their own research. He ends with personal remarks, viewer engagement prompts, and a sign-off.
But as a long-term investor, yes, I am absolutely buying the dip here, the the lower that the stock goes because when a dominant high margin powerhouse like this gets discounted because of political issues, executive changes, these are veryreal concerns, but these are things that sometimes create the biggest buying opportunities that you otherwise wouldn't get.So, that's how I personally see it.I try to be more optimistic about it, but I could be wrong about it.I mean, like I said, it it could it could actually suffer even bigger losses.So, um you know, you'll have to do your own due diligence.You'll have to make your own decisions.I'm just sharing my thoughts, guys.This is just how I feel.This is just what I'm doing.Don't copy me.Do whatever you think is best for your own portfolio.But, um but yeah, you know, either way, I'm wishing you guys the best of luck out there.
I'm trying to provide as much, you know, good information as I can.And I hope you guys are enjoying the videos.I hope I'm doing a good job.I don't know if I am.I'm trying.I I promise you I'm trying.Um I re-record videos all the time because I feel like I left something out.There's something I should have mentioned.Um my wife knows this.You know, I re-record videos, you know, sometimes three times just because I feel like I could have done a better job.So, I take this very seriously, guys.I do try my hardest.I know I know I get some criticism sometimes, you know, but I I do honestly try.And um so anyway, I just hope that you guys are enjoying the videos and um I hope you're all doing well out there.Let me know your thoughts down in the comments section.
How do you feel about all of this?Do you think it's a buying opportunity or are you staying far away?I can understand all views on this.I respect all views.So let me know down in the comments and um either way, I've got more videos coming for you soon.So stay tuned and I will catch you guys in the next one.All right, take care my friends.Wishing you the best.Bye-bye.