Big Growth, Open Questions: Reading Nvidia Without the Panic

What we actually know

On November 8th, Huang publicly acknowledged that he had been unfaithful to his wife and apologized to his family, employees, board members, and shareholders in a letter written to NVIDIA employees. He also pledged to cooperate with the board's investigation into national security concerns raised in news reports. New allegations have emerged regarding an additional affair, this time with a member of Nvidia's executive team who reports directly to Huang. The affair linked to Alice Huang, a business executive reportedly suspected of working for Chinese intelligence, shouldn't be presented as an established national security crisis. Nvidia's board said on November 8th that it had no reason to believe that national security or company secrets had been compromised, while making clear that its investigation would examine the available information. On November 10th, Nvidia's independent directors announced that they had retained former acting U.S. attorney Joon H. Kim and Wachtell, Lipton, Rosen & Katz to conduct the investigation. Although the board tried to calm investors by taking the legal position that it has, an investigation that is just beginning can't provide the certainty that investors ultimately want.

Why this matters to shareholders

There are two issues at heart here that should matter to a shareholder of NVIDIA. The first one is the possibility that this episode could affect customer relationships, regulatory decisions, management attention, and confidence in corporate oversight. These are

potential consequences of a loss of confidence in their CEO rather than a direct relationship to the actual affair. When a leader like Huang, who has helped make Nvidia's corporate strategy understandable and compelling to customers and investors, loses his standing because of a loss of trust, it can have major impacts on company morale and vendor relationships.

The other issue that should be examined here is that the business still deserves its own analysis independent of its CEO. For its second quarter of fiscal 2027, the company reported revenue of $96.2 billion, up 106% from a year earlier. Data center revenue reached $89 billion, an increase of 117%. Those numbers describe a business with substantial operating momentum heading into this controversy, as well as expectations of similar growth to be reported next week. The company is at the heart of the AI-driven trade that has been the core of this earnings-driven rally over the last three to four years in the U.S. markets. I'll be watching very closely the investigation and its findings about business conduct, information security, and oversight. Nvidia's leadership also has to maintain broader execution in ongoing business relationships that will help investors assess how the company will do without Huang, assuming that the board of directors chooses to remove him. The highly anticipated earnings report that is scheduled to be released next week on November 17th will also be a question in and of itself. If NVIDIA chooses to delay that report because of this investigation, I believe that could send shock waves not only through Nvidia's individual shares but through the S&P 500 as a whole. If the company can report that demand, margins, and guidance are all solid, it gives the company an opportunity to take some of the immediate fear surrounding this whole situation out of the equation.

Can I trade this?

For me, this is the reason that I trade collar trades. A collar trade is designed to control the risk in an investment during short-term uncertainty. An earnings event in and of itself is usually enough uncertainty to warrant the use of a collar trade. If you add on this mess surrounding the CEO, it provides even more justification for understanding how to use this equity- and options-based combination. A collar is a relatively simple trade using the combination of an equity position, a long put position, and a short call position. The long put position acts as a hedge against a drop in the value of the stock, while the short call position helps offset the cost of the purchase of that long put. This options trade allows me to protect capital while still being able to participate in some upside if the stock were to rebound.

The longer-term question regarding ownership in NVDA shares should be built around the long-term AI-driven demand for this company's products. AI is not going away, but that doesn't mean that the leader, NVIDIA, can't lose its spot at the top of this technology-driven rally.

Sources: 

1. Nvidia: A Message to Our Company, November 8

2. Associated Press: Nvidia investigation and leadership questions

3. Nvidia: Board statement, November 8 

4. Nvidia: Independent directors’ statement, November 10 

5. Nvidia: Second-quarter fiscal 2027 results 

6. Nvidia: Third-quarter earnings announcement

» FUTURES «

Safe Haven or Rate Story? Gold Has Traders Rethinking

Gold is losing its shine and futures traders are feeling it 

Gold's reputation as a safe haven is running into an uncomfortable reality. Higher interest rates and a strong dollar can have a bigger impact than its appeal as an inflation hedge. December gold futures fell below $4,000 an ounce this week, trading near $3,955 Thursday morning. This retreat followed a hotter-than-expected inflation report in the CPI data that strengthened expectations of additional interest rate increases coming from the Federal Reserve. For gold bulls, that creates a problem in that inflation remains, but the anticipated policy response is pressuring prices. 

Gold produces no income. So when Treasury yields rise, investors have a stronger incentive to hold an interest-bearing asset like a bond instead. An increasing dollar also adds negative pressure to the dollar-denominated asset of gold, making it more expensive for overseas buyers. The futures market takes those pressures and adds leverage. 

CME’s standard COMEX Gold futures contract represents 100 troy ounces. That means a $50-per-ounce decline translates into a $5,000 loss for someone holding one long contract. Micro gold futures represent 10 ounces, reducing the same price move to $500. Smaller contracts can help traders manage risk exposure better, but they do not eliminate the risk of losses exceeding the initial margin deposit. When a supposed defensive asset starts trading aggressively, it can sometimes disrupt the idea that an investment in gold is supposed to be a safe haven in turbulent times. Futures positions are marked to market daily, so there is a chance that a trader can face a demand for additional funds even while maintaining a longer-term bullish outlook. 

The $4,000 level is a pretty important reference point. Oftentimes, these large, even numbers act as levels of both support and resistance in trending markets. The bulls are trying to hang on to $4,000 as a level of confidence. Before I'm convinced that buyers have regained control of the gold market, I would want to see sustained strength around this $4,000 number alongside some relief in both the dollar and Treasury yields. Keep an eye on volume as well. Gold may eventually recover its shine, but for futures traders, the immediate question is whether the next rebound attracts committed buyers or simply gives existing longs a better exit.