The Bad News Is Just Getting Started For Nvidia And Tech Stocks...

Submitted by QTR's Fringe Finance

I’m not trying to be a “permabear” or a “hater”, only trying to objectively relay to my kind readers where it appears that we are, amidst this muck and mire in markets right now. Admittedly, I see things through a more cynical set of glasses than most when it comes to markets. But, with more than a decade of experience doing forensic investigative research on the short side of markets, I have also seen far more ugly shit than most people have.

Bearing that in mind, it is my opinion that the pain for Nvidia, the broader market, and the AI trade is far from over. In fact, I think we’re still in the early stages of a process that could take weeks, if not months, to fully play out. And with sentiment toward technology already looking increasingly fragile, I don’t think investors appreciate just how much additional damage could be waiting around the corner.

Contrary to what some may believe, I don’t just wake up every morning and write random shit on this blog to fill space. I generally have a roadmap in my mind that I come by honestly and try and share with readers. Over the last six days, as the Nvidia saga has unfolded, I’ve taken plenty of criticism for the points I’ve raised about the company, Jensen Huang, and what this scandal could mean for the market.

And while I certainly haven’t gotten every detail right, I think the broad direction of my concerns has been increasingly validated by subsequent events. Today, I want to revisit those warnings, update readers on where I stand, and reiterate and explain one important point going forward: I don’t think this story is anywhere near over, and I don’t think the market has fully priced in what could come next.

After last week’s AI-driven Nasdaq crash, I wrote a couple of pieces explaining why I thought the initial selloff might only be the beginning. In one of them, titled After The Crash, Another Wave Of Bad News, I wrote:

It’s that the market’s reaction to yesterday’s crash is not nearly as important as what yesterday’s crash may have set in motion.

I expect enormous volatility in both directions, policymakers to begin exploring ways to stabilize markets if the selling continues, and the AI industry’s increasingly questionable valuations to face more scrutiny. Most importantly, I expect the coming days to reveal financial, corporate, and political consequences that simply haven’t had enough time to become public yet.

I continued:

Because I don’t think the biggest question is whether the market can bounce. I think the biggest question is how many companies, investors, and lenders built their plans around the assumption that it would never stop going up.

Yesterday, the market finally started asking that question. Over the next several days, I suspect we’re going to start getting some answers, and I have a feeling some of them are going to be uglier than people expected.

That was my concern then, and it remains my concern today. When a market has been built around a handful of companies, enormous expectations, and the assumption that an investment boom can continue indefinitely, the first sharp selloff isn’t necessarily the whole event. Sometimes it’s just what starts exposing the problems.

And in Nvidia’s case, I think we’re watching that process unfold in real time.

On Sunday morning all we knew was a couple of allegations against Jensen Huang. There was no admission, no major board statement, no follow up reporting. There was the headline that he may have been compromised and that was it. It seemed to be something that could pass quickly. Espionage efforts during a global chip race are hardly surprising and many thought Jensen was likely just an innocent victim.

But I still asked the then uncomfortable question of whether Huang could be forced to resign. Then, just hours later on Sunday afternoon, Huang publicly acknowledged an extramarital affair amid reports involving Alice Huang, a Chinese businesswoman at the center of allegations concerning Chinese intelligence and Nvidia’s chip sales.

Those allegations have not, by themselves, established wrongdoing by Nvidia or its CEO. But I thought the potential implications for the company could be enormous, and I wrote:

What would happen if Huang stepped down? How much key-man risk is embedded in Nvidia after he almost single-handedly built it into the company it is today?

And lest we forget…I’m getting ahead of myself here, but that’s what I do….there’s also the uncomfortable reality that major executive departures can sometimes bring previously concealed problems into the open.

I added that new leadership, new scrutiny, and changing incentives can have a way of revealing things that were previously swept under the rug. That wasn’t an allegation that Nvidia was hiding anything. It was a reminder that when a company this important suddenly faces a leadership crisis, the consequences can...(READ THIS FULL ARTICLE 100% FREE HERE). 

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