If Jensen Huang is really replaced, how much will NVIDIA drop? Three valuation estimates point to $110–$155

It's really never-ending!

Just after the scandal of infidelity broke, Old Huang "keeps pushing forward" and another scandal erupts involving an affair with a female subordinate.

This is serious!

If he had an affair with a woman outside, it could be seen as a mistake that all men make, but having an affair with a subordinate in his own company directly violates company regulations, giving the board reason to dismiss Old Huang.

Initially, it was said that the probability of being replaced was low, but now the situation has taken a turn, raising the probability to its maximum.

Now there are indeed rumors that the board plans to dismiss Old Huang, and the stock price briefly dropped nearly 10% after hours.

I believe that various institutions' risk control and valuation models are frantically calculating how much NVIDIA would drop if Old Huang loses his position.

Let's calculate it.

From a level perspective, if Jensen Huang is indeed dismissed by the board, it will be a shock comparable to Steve Jobs leaving Apple in 1985 in the history of U.S. tech stocks.

In the face of such a significant shock, one can only forcibly strip away all emotional reluctance and must use pure business logic and institutional valuation models.

First, let's discuss the real impact on operations.

Many retail investors easily fall into the linear panic of "Jensen Huang leaving = NVIDIA is finished."

But in fact, NVIDIA is already a modern organization with a market value of over $4 trillion and tens of thousands of top engineers.

Its business barriers consist of irreplaceable hardware/ecosystem moats and a strategic dividend that heavily relies on the founder.

In the next 1-2 years, this hardware and ecosystem moat will not change.

The underlying code of millions of AI developers and cloud giants is deeply tied to CUDA, and the migration cost is astronomical.

Major clients, such as Microsoft, Google, Amazon, and Meta, will not stop using the H200/Blackwell architecture just because the CEO has changed.

Locked-in orders and product roadmaps: the development of the Rubin architecture for the next 1 to 2 years has already been finalized, and TSMC's CoWoS advanced packaging capacity has also been secured in advance.

Revenue and free cash flow will not cease just because Old Huang leaves.

In terms of corporate governance, even if Jensen Huang leaves, NVIDIA still has senior veterans like Colette Kress (CFO) and Jay Puri (Global Operations Executive Vice President) to support daily operations.

However, within 2-5 years, the "founder premium" will gradually disappear.

Jensen Huang's greatest value lies in his willingness to bet on CUDA in 2006 and AI in 2016 when no one believed in it, investing heavily despite significant losses.

After a professional manager takes over, the company will become more stable and compliant, but the sharpness of radical innovation will inevitably decline. Refer to Apple after Tim Cook succeeded Steve Jobs: operational and profit capabilities are strong, but disruptive innovation has slowed.

Regarding the core supply chain, Jensen Huang's personal bargaining power with TSMC and his close relationships with Morris Chang and Wei Zhejia helped NVIDIA secure a large amount of scarce capacity during times of extreme shortage.

After a professional manager takes over, the supply chain negotiations will revert to pure commercial terms, and gross margins may face a slight compression of 2%-4% in the long term.

There is also a risk of losing core technical personnel; in the next six months, the market will closely monitor whether VPs in hardware and software architecture departments will be poached by competitors (AMD, Broadcom, Google TPU team) with high salaries.

How much does the stock price need to drop to fully price in the "removal of Jensen Huang"?

When Wall Street re-prices tech giants with "founders being dismissed," it usually applies a very cold formula of "removing founder premium + governance discount."

During Jensen Huang's peak, NVIDIA enjoyed a dynamic price-to-earnings ratio (PE) of 30x-35x.

Once a leadership change is confirmed, Wall Street will downgrade it from a "high-growth belief stock" to a "mature monopoly tech cash cow," compressing its reasonable valuation center to 18x-22x PE, comparable to Broadcom, Qualcomm, or mature Apple.

Corresponding specific stock price valuation range calculations

Combining NVIDIA's current earnings per share (EPS) expectations, if the "removal of Jensen Huang" is officially announced, the market needs to complete the thorough pricing through the following three steps:

First Step: 145-155 (dynamic PE about 20x-22x)

When the stock price drops to this level, the market has roughly digested the negative impact of business violations and management turmoil.

Second Step: 125-135 (dynamic PE about 17.5x-19x)

If the board formally announces the dismissal of Jensen Huang as CEO, and the new interim CEO has not yet proven themselves, the market will apply an additional 10%-15% transition period uncertainty discount.

This roughly digests the "Jensen Huang personal premium," leaving the asset value of TSMC capacity, CUDA ecosystem, and hundreds of billions of dollars in pure cash flow.

Third Step: 110-120 (dynamic PE about 15x-16.5x)

This range belongs to a multiple negative pressure zone, such as another leadership change, a financial report disaster on November 17 (significant order cuts), the Department of Justice issuing a massive fine, macroeconomic and liquidity crises, etc.

The above is just a prediction and may not cover all aspects; how it unfolds will also depend on other market factors, so the results are for reference only and do not constitute investment advice.