• Melius cut NVIDIA (NASDAQ:NVDA) to Hold from Buy with a $185 price target, marking a sharp shift from its previous bullish stance.
  • The downgrade comes as NVIDIA's board considers removing CEO Jensen Huang amid an investigation into possible foreign intelligence targeting.
  • Despite robust AI-driven revenue growth, investors are weighing governance risks against operational momentum ahead of earnings on November 17.

Melius has downgraded NVIDIA to Hold from Buy with a $185 price target, according to a note released Friday, injecting fresh caution into a stock already reeling from a leadership crisis at the world's leading AI chipmaker. The move represents a significant reversal for the research firm, which had maintained a Buy rating as recently as November 2, albeit with a reduced target of $315.

The downgrade comes amid reports that NVIDIA's board met on November 11 to discuss removing founder and CEO Jensen Huang following allegations of two extramarital relationships and an ongoing investigation into whether he was targeted by a foreign intelligence effort. The board has not announced a decision, and sources familiar with the matter emphasize that no removal has occurred. NVIDIA declined to comment on the Melius note and did not respond to requests for comment on the board's deliberations.

Huang, who co-founded the company in 1993, remains central to NVIDIA's strategy and customer relationships, making the prospect of his departure a critical concern for investors. The board initially expressed confidence in Huang after launching an independent investigation on November 8, stating it had "no reason to believe" national security or company secrets had been compromised. But the situation escalated quickly, with Reuters (NASDAQ:TRI) reporting that directors are now considering potential successors, including CFO Colette Kress and senior technology executive Ian Buck.

The downgrade also reflects growing unease about NVIDIA's valuation and the sustainability of the AI investment boom. While the company's latest quarterly results showed revenue more than doubling year over year to $96.2 billion, with data-center revenue up 117%, skeptics worry that spending by cloud providers and AI-infrastructure operators may peak. Melius's new target of $185 implies a significant downside from current levels, though the stock has already fallen sharply since the leadership crisis began.

Other analysts have also turned more cautious. Bernstein and Oppenheimer (NYSE:OPY) downgraded NVIDIA following the latest developments, while Citi (NYSE:C) reduced its target. Baird moved to Neutral, citing government-action uncertainty, the investigations, possible channel adjustments, and questions about CEO tenure. Still, some remain optimistic: CoreWeave (NASDAQ:CRWV)'s better-than-expected results and higher revenue outlook this week helped lift NVIDIA and the broader semiconductor sector on November 11, underscoring resilient demand for AI computing.

The downgrade also highlights the complex regulatory environment facing NVIDIA. U.S. restrictions on exports of advanced GPUs to China remain in place, and the company reportedly told cloud customers that at least 51% of their business must come from non-Chinese customers for affected future contracts. The investigation into Huang adds a politically sensitive dimension to the debate over whether such restrictions protect national security or accelerate China's development of competing chips, with Huawei emerging as a leading domestic alternative.

As NVIDIA prepares to report earnings on November 17, investors will be watching for clarity on leadership and confirmation of its $108 billion revenue guidance. The board's next move and the outcome of the investigation will likely determine whether the stock can recover from its recent slide. For now, the Melius downgrade serves as a stark reminder that even dominant companies are not immune to governance risks.