Nvidia stock faces double threat: Why is Jim Cramer questioning his rule?

Nvidia stock NASDAQ:NVDA tumbled on Monday despite Wall Street's rally, as concerns about chief executive Jensen Huang and AI data-centre financing rattled investors.

The stock fell 4.27% to $178.67, its lowest close since April, while the Nasdaq Composite jumped 2.74% and the Philadelphia Semiconductor Index gained 6.85%.

Nvidia's board has opened an independent investigation following reports that Huang was targeted by a foreign intelligence operation. Opposition to data-centre construction also threatens customer financing.

The combination has prompted CNBC's Jim Cramer to question his longstanding Nvidia rule: "Own it, don't trade it."

Nvidia stock today: Why Cramer is questioning his rule

Cramer has championed Nvidia's dominance of AI computing for years, arguing that investors should hold its shares through market turbulence rather than attempt to time every price movement.

He is now considering Nvidia without Huang.

"We're going to have to consider owning shares in a Jensen-less Nvidia," Cramer said on CNBC's Mad Money on Monday.

The concern follows Nvidia's announcement on Sunday that independent directors, assisted by outside counsel, would examine reports of a possible foreign intelligence effort targeting Huang.

The company said it had no reason to believe national security or corporate secrets were compromised. Huang remains chief executive, is cooperating with the review and retains the board's confidence.

Cramer stressed that Nvidia possesses a strong management bench and a multiyear product roadmap.

He still considers the business attractive and has not urged investors to liquidate their holdings.

His concern is whether leadership uncertainty could weaken a company whose strategy, government relationships and largest customer partnerships are closely associated with its founder.

Nvidia Jensen Huang investigation: Financing fears could threaten growth

Cramer's other worry concerns the companies buying Nvidia's processors.

AI data centres require enormous upfront spending, reliable electricity supplies and government approvals.

Political opposition to new facilities, sharpened by Democratic gains in the US midterm elections, could slow construction even if demand for computing power remains strong.

Smaller cloud providers such as CoreWeave, Nebius and Iren face particular scrutiny because expansion often relies on raising money from investors and lenders.

Unlike Microsoft or Amazon, they cannot necessarily finance ambitious projects from established cash flows.

Cramer warned that tighter financing could leave these companies unable to build facilities needed to accommodate Nvidia chips.

Bernstein described the Huang controversy as a potentially serious distraction that could intensify political pressure on AI infrastructure.

Nevertheless, Bernstein maintained its Outperform rating and $400 price target, saying underlying product demand appeared unlikely to suffer directly.

Can Nvidia earnings restore investor confidence?

Nvidia's decline was especially striking because rival semiconductor stocks rallied.

Advanced Micro Devices climbed 13.26% on Monday and Broadcom advanced 8.78% as investors returned to technology shares following last week's sell-off.

But Nvidia had already been under pressure from expensive AI valuations, financing worries and questions about regulation. The board investigation added a separate governance risk to an already fragile investment outlook.

Josh Gilbert, lead analyst at eToro, told Reuters that "Nvidia's earnings on November 17 are the real next test."

The fiscal third-quarter report will reveal whether spending by major cloud customers remains strong and whether Nvidia can sustain growth amid uncertainty surrounding new infrastructure projects.

AI disclosure: AI tools assisted with research and drafting of this piece. An Invezz editor reviewed the facts, sources and wording before publication. Any opinions or analysis are Invezz’s, not those of an automated system.