Asian Markets Slip as Nvidia Leadership Worries Weigh on AI-Linked Shares

Synopsis

Most Asian markets declined on Thursday amid worries about leadership at artificial intelligence related stocks at Nvidia. The Nikkei 225 fell 0.7% in Tokyo, Kospi 0.6% in Seoul, and the Hang Seng and Shanghai Composite 0.7% and 2.6% respectively in Hong Kong. The shares of Nvidia dropped 8.6% after hours following reports that its board was discussing the future of its CEO, Jensen Huang. Wall Street had been up on Wednesday, with the S&P 500 gaining 1.3%.

World stocks were mixed on Thursday, with worries over leadership at chip maker Nvidia weighing on the shares of those related to artificial intelligence. The slide wasn't seen across all markets, but rather in markets connected to the chips.

The day’s moves

Japan’s Nikkei 225 shed 0.7% to 60,819.36. South Korea's Kospi lost some ground to end 0.6% lower at 5,342.73. Taiwan’s Taiex lost 2.6%, and Australia’s S&P/ASX 200 declined nearly 0.1% to 9,146.80. Hong Kong’s Hang Seng lost 1.3% to 24,008.55, and the Shanghai Composite fell 0.7% to 3,655.83.

Tokyo, Seoul, Hong Kong, Shanghai, Taipei, Sydney, Singapore, Mumbai, Bangkok and Manila all fell, but there was a rise in Jakarta and Wellington.

Why Nvidia is in the spotlight

Nvidia stock dipped 8.6% in after-hours trading, as its board convenes late Wednesday to discuss CEO Jensen Huang, who has come under national security scrutiny for an affair with a Chinese woman. Nvidia stock was up 2.9% on Wednesday. The governance questions are dealt with in our separate report on the board meeting.

It is impossible to determine precisely the revenue loss caused by Huang's departure, said Swissquote senior analyst Ipek Ozkardeskaya. Some investors could be paying a “disputed price” for Nvidia shares, according to the same report.

The larger question of AI profitability

The Nvidia news landed on an existing worry. Outside of Nvidia, investors worry that AI could stall as there has been a long-standing debate on whether it will be profitable enough to warrant its massive investment.

The S&P 500 ended up climbing back from its sell-off last week, in the face of fears of a possible AI slowdown, on Wednesday. CoreWeave, a cloud-based company that leases out AI chips, rose 24.7% following a loss of less than analysts predict during the summer.

The outlook

The short-term direction will depend on the outcome of Nvidia's board meeting, and whether or not they make a decision. Nvidia will report earnings Nov. 17. For the time being, the focus of Asian shares will be on boardroom news, rather than earnings, when it comes to AI.