Morgan Stanley drops Nvidia from top-picks list, following BofA

Morgan Stanley has removed Nvidia from its semiconductor sector 'best picks' list, saying that uncertainty surrounding Jensen Huang has made the risk-reward balance less favorable. In a Wednesday research note, Morgan Stanley analysts described Huang's leadership as 'critical' to the company's strategic direction, while still maintaining an 'Overweight' rating on the stock.

The move follows a similar action by Bank of America, which on November 10 removed Nvidia, Micron Technology, and Lam Research from its 'US 1' select list while keeping 'Buy' ratings on all three companies. BofA analyst Vivek Arya outlined three scenarios in the note: the impact stays contained and leadership remains stable; uncertainty continues to weigh on valuations; or a leadership change or tighter regulatory restrictions would require a reassessment of earnings expectations.

In market trading, Nvidia fell 4.3% on Monday and 5.47% on Tuesday, a two-day drop of nearly 10% that erased roughly $470 billion in market value. According to CNBC, Huang returned to the office on Monday in an effort to signal that business was normal, and continued to hold meetings there on Tuesday. Nvidia shares rebounded in Wednesday's premarket, rising as much as more than 5%. Morgan Stanley and BofA have both completed their list adjustments, and both banks still maintain Buy or Overweight ratings on Nvidia.