Nvidia hired an external law firm over the scandal surrounding CEO Jensen Huang. Lawyers will check whether corporate secrets and US national security were compromised. On Wednesday, November 11, the stock was adding 5.3% in premarket trading after two days of selling.
What premarket is. This is trading before the main US session opens. Prices there are already reacting to news, even though the main session is still closed.
Why this matters to a trader. Nvidia is one of the most weighted stocks in the S&P 500 and Nasdaq 100. Its 4-5% daily swings drag index futures along with it.
How did the stock move?
- Monday. The stock lost 4.3%.
- Tuesday. Closed at -5.47%.
- Wednesday, November 11. By 5:47 New York time (13:47 MSK), Nvidia was adding 5.3% in premarket trading.
Why did the stock fall?
The trigger for the sell-off. It was set off by reports of Jensen Huang's affair with a woman described as a Chinese spy.
- On Tuesday, Nvidia hired the law firm Wachtell, Lipton, Rosen & Katz to find out whether company secrets had leaked.
- Huang himself was in the office on Monday and Tuesday holding meetings, showing that work was proceeding as usual.
Who has already been affected?
- Morgan Stanley. On Wednesday the bank removed Nvidia from its list of top ideas. Since being added on October 2, the stock has fallen more than 25%. Analysts called Huang's leadership key to the company's strategy.
- Zacks. Chief strategist John Blank attributed the sell-off to fear of new US restrictions and the question of "what else has Jensen done."
What's next?
Nvidia's quarterly report comes out on November 17. Attention to the company's ties with China in chip manufacturing has been added to it. The date is worth marking in the economic calendar.
Key point: until November 17, the stock trades on headlines about the investigation; after that, on the report's numbers.
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Wondering what to trade this with - the stock itself or an index future? From there, the prop firm's rules decide. Some props don't have stocks in their instrument list at all, while others prohibit holding a position through a report's release. Nvidia's report is on November 17, and it's useful to know your restrictions before that date. The filter shows which programs offer stocks and how their trading during reports is specified.