Nvidia stock rises as CEO Huang faces scrutiny over affair

Nvidia‘s stock rose 2.87% on Wednesday, after falling for two days amid the scandal that has rocked the world’s most valuable tech company.

Shares closed down 5.47% on Tuesday as more details were revealed about the impact of CEO Jensen Huang‘s affair with an alleged Chinese spy. They fell 4.3% Monday.

On Tuesday, Nvidia announced it had hired law firm Wachtell, Lipton, Rosen & Katz to investigate whether company secrets or national security were compromised.

Huang tried to project “business as usual” as he returned to the office on Monday, people familiar with the matter told CNBC. The CEO was also in the office on Tuesday, conducting meetings, ahead of the company’s quarterly earnings on Nov. 17.

Investors are assessing whether the matter will have damaging spillover effects on the business.

In a Tuesday note, Bank of America said it saw three scenarios with differing investment outcomes. In one scenario, the impact is contained with leadership continuity, and in another, prolonged uncertainty pressures valuation before earnings.

In the final scenario, the impact is escalated, with “adverse findings, leadership disruption or tighter restrictions requiring earnings reassessment,” BofA research analyst Vivek Arya said in the note.

Zacks’ Chief Equity Strategist John Blank said the selloff reflected two concerns: that the U.S. might impose further restrictions in the wake of the affair and that further problems might arise as the news develops. “What else has Jensen done?” he said.

“It’s not good for Nvidia. It’s not good for Jensen Huang. It’s certainly not good for the AI trade,” Blank told CNBC’s “Squawk Box Europe” on Wednesday.

Morgan Stanley on Wednesday removed Nvidia as a top pick after shares dropped more than 25% since it was named on the list on Oct. 2. Huang’s leadership is “crucial” to the company’s strategic direction, analysts said in a Wednesday note.

— CNBC’s Michael Bloom and Caleigh Keating contributed to this report.