Nvidia Faces Independent Investigation, Bernstein Maintains $400 Price Target

TL;DR

· NVIDIA's board has launched an independent investigation and stated that it currently has no reason to believe U.S. national security or company secrets have been compromised.

· Three U.S. House committee chairmen have requested that Jensen Huang appear at a closed-door briefing on November 18 to explain the relevant interactions and NVIDIA's internal security protocols.

· After export controls were implemented, NVIDIA's China region (including Hong Kong) revenue share declined significantly. Starting from the third quarter of fiscal year 2026, the company changed to reporting regional revenue based on customer headquarters location, and cross-period comparisons need to account for the change in methodology.

· Bernstein expects that data center customers' procurement demand will still be supported in the near term, and the impact of the controversy on operations depends on whether congressional scrutiny further touches China chip export policy.

· Bernstein maintains an "Outperform" rating and a $400 price target, approximately 114% above the November 6 closing price.

U.S. lawmakers' inquiries into Jensen Huang have expanded from personal interactions to NVIDIA's internal protocols for guarding against foreign intelligence activities. Bernstein maintains its $400 price target and remains bullish on earnings growth driven by the data center business. Meanwhile, whether Congress will further scrutinize chip export policy and how NVIDIA arranges management succession have become two variables for investors assessing company risk.

Board launches independent investigation, lawmakers request closed-door explanation

On November 8, NVIDIA's board announced the launch of an independent investigation and stated that it currently has no reason to believe U.S. national security or company secrets have been compromised.

Since late October, The New York Times, The Wall Street Journal, and the Financial Times have successively reported on Jensen Huang's interactions with Megaspeed technology executive Alice Huang. Some reports, citing anonymous sources, said U.S. intelligence agencies have concerns about Alice Huang's background and the interactions between the two. Singapore's Ministry of Home Affairs subsequently rebutted some claims in The Wall Street Journal, stating that the Singapore government and its officials have not expressed concerns about the interactions between the two or related intelligence allegations, nor have they investigated Alice Huang on this matter. Singapore also confirmed that it is investigating Megaspeed.

On November 5, three Republican chairmen of the U.S. House Foreign Affairs Committee, the Select Committee on China, and the Permanent Select Committee on Intelligence sent a request for Jensen Huang to appear at a closed-door briefing on November 18 to explain his interactions with Alice Huang and NVIDIA's internal protocols for guarding against foreign intelligence activities. Democratic Senator Chris Coons also publicly stated that Congress will launch an investigation into the matter.

Rebound in China Sales Constrained, Chip Export Policy May Face Further Scrutiny

Some reports suggested that Alice Huang may have influenced Jensen Huang's lobbying efforts, prompting him to push for relaxed export restrictions on Nvidia chips to China. Bernstein expressed skepticism about this claim. Jensen Huang has publicly advocated for expanding Nvidia's sales in the Chinese market for years. After export controls were implemented, the company's revenue share from mainland China and Hong Kong still declined noticeably.

The methodology for calculating this revenue share has also changed. Starting from the third quarter of fiscal year 2026, Nvidia began classifying regional revenue based on customer headquarters location. When making cross-period comparisons, it is necessary to distinguish between changes in customer attribution and changes in end demand.

The products approved for sale to China at the time were mainly the H20 and a limited quantity of H200, representing a generational gap compared with Nvidia's most advanced chips. Bernstein believes that as Chinese customers prioritize domestic solutions, even if some products are approved for export, the room for recovery in local sales remains limited.

Bernstein expects that procurement demand from global data center customers will still be supported in the near term. Regulatory pressure may persist longer. Lawmakers with hardline positions on China may use this to re-examine chip export restrictions, and Democratic lawmakers may further press Nvidia on its dealings with the Trump administration. If congressional inquiries touch on China export policy, the impact of the controversy on the company's operations will be more direct.

Earnings Growth Supports Target Price, Succession Arrangements Still Unclear

On November 6, Nvidia closed at $186.64, underperforming the S&P 500 by 10.5 percentage points over the past 12 months. Bernstein's $400 target price is about 114% above that day's closing price.

Bernstein expects Nvidia's adjusted earnings per share to rise from $4.77 in fiscal year 2026 to $9.20 in fiscal year 2027 and $15.80 in fiscal year 2028. Based on the November 6 closing price, the corresponding price-to-earnings ratios are 39.1x, 20.3x, and 11.8x, respectively. The $400 target price uses longer-dated earnings forecasts, applying a price-to-earnings ratio of about 21x to the average non-GAAP earnings per share of $19.04 for fiscal years 2028 and 2029.

While maintaining its "Outperform" rating, Bernstein also listed Jensen Huang's succession as a key risk. Jensen Huang leads Nvidia's long-term strategy and is directly involved in multiple core business areas. According to reports, about 60 people report directly to him. If he is unable to continue serving, the successor and how strategy and operations would be handed over remain unclear.

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