Daily market update: Nvidia, Kainos

A fragile recovery in markets was seen across Asia and Europe on Monday.

However, with a potential espionage scandal at Nvidia in the background, US futures were pointing to a mixed start when trading gets underway later with the tech-focused Nasdaq index going back into reverse.

Investors are clearly not ready to put the AI slowdown-related fears unleashed by the Democratic blue wave in the midterms behind them.

Oil prices pulled back as Donald Trump said it was ‘highly unlikely’ the US would resume major strikes on Iran if peace negotiations made progress, with Brent crude falling below $97 per barrel.

While this has positive implications for the inflationary backdrop, it was bad news for the UK market’s contingent of oil and gas businesses, and this helped limit the FTSE 100’s gains at the start of the week.

Gold miners were higher as the precious metal found some sparkle and other mining shares also benefited from rising prices for industrial metals. These commodities benefited from weakness in the US dollar and a recent easing in government bond yields.

IT services firm Kainos was firmly on the naughty step with investors despite reporting strong revenue and profit growth. Investors were unimpressed by evidence of pressure on gross margins and an underwhelming full-year outlook.

Nvidia

Dan Coatsworth, Head of Markets at AJ Bell, comments: 

How boards view undisclosed CEO romantic relationships often depends on who is involved. Relationships with colleagues can raise conflicts of interest and favouritism concerns, while those outside the company are usually private unless they pose security, reputational or company-resource risks.

Nvidia chief executive Jensen Huang is in a precarious position, and the dial on his situation currently sits at ‘highest risk’. Personal scandals never sit well in the corporate world, let alone ones where the CEO is being investigated for an affair with a suspected foreign spy.

Given pre-existing sensitivities around China accessing US technology, and various export restrictions already in place, Nvidia’s situation is going to be treated with intense scrutiny. It wouldn’t be a surprise to see Jensen Huang step aside on a temporary basis while an investigation takes place.

Even if Jensen Huang is found not to have discussed any confidential information with the woman in question, the affair is not a good look for a company that prides itself on family-based cultural values. It’s plausible that Jensen Huang might decide to step down as CEO if he thinks the incident has tarnished the company’s reputation, as well as his own. Or the board might decide he has to go.

Yet one could see why Nvidia’s board might be keen to back Jensen Huang and not lose him. He has been the architect of Nvidia’s success, making it the go-to place for advanced AI chips, and making shareholders seriously rich along the way. He is the face of Nvidia, and many shareholders big and small might prefer him to stay put if it means a continuation of the current strategy.