It's not about Huang's affairs... Where we are in the AI boom-and-bust cycle... The three risks for Nvidia now... Semiconductors are in a bear market... Bludgeonings and smugness... 'Dismayingly unattractive' stocks...
All I (Dan Ferris) have to say about former Nvidia CEO Jensen Huang's affairs is...
They're none of my business.
I feel a little sorry for his wife and kids, but the details of the affairs don't really concern me.
Perhaps if we find out that Huang sold secrets to the Chinese government or unwittingly gave it some kind of secret technology, that might be an important consideration for Nvidia's (NVDA) share price.
Otherwise, when it comes to Nvidia, I'm far more interested in figuring out if it tells us anything about where we are in the AI boom-and-bust cycle.
Don't get me wrong. I still believe it's futile to call market tops and bottoms. It's hard enough to figure out when they've occurred after the fact. But we can try to get a sense of where we stand at the moment.
As Ferris Bueller famously pointed out in the 1986 film Ferris Bueller's Day Off, "Life moves pretty fast. If you don't stop and look around once in a while, you could miss it."
And today, I don't think it's crazy to assume that a topping process has begun...
Remember, a market bottom is an event, but a top is a process. It doesn't mean the big indexes won't make new highs. It just means the process that will eventually end the bull market has begun.
Exhibit A is that AI darlings like CoreWeave (CRWV), Broadcom (AVGO), Nebius (NBIS), and Nvidia are trading deep in bear market territory.
Meanwhile, the S&P 500 Value Index and the S&P 500 Equal Weight Index are both outperforming the S&P 500 Index. The Value and Equal Weight indexes assign bigger weights to non-AI sectors like healthcare, energy, and financials, while nearly 40% of the S&P 500 Index is made up of the top 10 stocks by market cap, which are nearly all AI bets. The top 10 stocks accounted for 43% of the index as recently as July. I estimate the current weight to be around 38% to 39%, still well above the dot-com era high of 29%.
Nvidia's role in all of this is unique. It has been the primary AI darling since OpenAI introduced ChatGPT on November 30, 2022. Since that day, Nvidia has risen as much as 1,300%. The story is simple: Nvidia produced the first chips needed for AI.
Nvidia became the biggest stock by market cap in the S&P 500 in June 2024. But it recently gave up that spot as AI stocks weakened and Huang's affairs were discovered. As of yesterday's market close, Nvidia was fourth, behind Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOGL).
Given the record-high concentration of the top 10 stocks in the S&P 500 and the fact that Nvidia was the biggest stock throughout the most manic portion of the AI boom... I have to wonder if Huang's fall from grace isn't a sign that investors are starting to fall out of love with his company and the overall AI trade. And maybe it's a sign that investors don't understand Nvidia as well as they thought they did.
I'm talking about Nvidia's business...
Morgan Stanley estimates that the complex financial structures Nvidia uses to support its customers could increase its total credit exposure from the $38.9 billion of debt on its current balance sheet to as much as $200 billion by the end of 2028.
That includes leases, guarantees, and various other types of credit support that are part of a deal investment firms Apollo Global Management, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR made to put $500 billion into the Nvidia ecosystem.
The bottom line is that Nvidia could be on the hook for a couple hundred billion dollars in liabilities, most of which is dependent on the financial performance of its customers. It's acting like a bank, prompting some to say it's playing a "balance sheet as a service" game.
There has been a lot of talk about the circular financing deals in the AI industry. In my book, Capitalism in Crisis, I discuss the $800 billion Nvidia and five other companies invested in OpenAI. I also note the collective $3 trillion of off-balance-sheet liabilities Nvidia and eight other companies hold. (Ferris Report subscribers and Alliance members can find my book here. For everyone else, you can click here to learn more about how to get a copy.)
I'm not saying Nvidia is a bad business. It has created something truly amazing, and its products are justifiably in high demand today. For now, it's a great business that's growing revenue and gushing free cash flow.
It reminds me of dot-com-era stalwart Cisco Systems (CSCO)...
Cisco is the well-known supplier of "Internet plumbing," the switches and routers that make up important parts of the Internet's infrastructure. It was the no-brainer stock owned by hundreds of mutual funds during the dot-com boom.
Its stock soared more than 620% in the final stretch of the dot-com mania from October 1998 to March 2000. It peaked at a closing price of $80.06 on March 27, 2000 and bottomed at a close of $8.60 on October 8, 2002 – an 89.3% decline.
The company's results were never nearly as bad as its share-price move suggested. Revenues fell 15.2% in 2002 and another 0.2% in 2003. It returned to growth in 2004 and eclipsed its 2001 record high revenue in 2005.
Cisco did engage in vendor financing, but not to the degree that Nvidia does today. Its balance sheet remained excellent. It kept gushing free cash flow. It remained a great business. But its share price still fell nearly 90%.
The overwhelming reason the stock fell so much is that folks paid way too much for it in the years before the dot-com peak. Cisco traded at a market valuation as high as 216 times earnings in March 2000. By October 2002, it traded for less than 22 times earnings.
Nvidia's price-to-earnings ratio peaked at 222 in 2023 and has fallen into the mid-20s today, due entirely to its hypergrowth in sales and earnings. Its annual earnings per share were $0.18 in 2023 and skyrocketed to $4.90 in 2026.
Nvidia's valuation has already been compressed back down to a more reasonable level, so that's not a huge source of risk anymore.
But there are three other big risks that could send shares falling...
First, that Alice Huang (the Megaspeed executive who Jensen Huang had an affair with) really is a spy (as U.S. intelligence officials reportedly suspect) and that Jensen Huang may have compromised U.S. national security in some way that everybody thinks is a big deal.
Second, that Nvidia's financing blows up its balance sheet.
Third, semiconductor manufacturing is a highly cyclical, capital-intensive, and (usually) highly competitive industry. Nvidia's success simply attracts lots of new competition, which we have to assume will eventually start to eat into its operating results.
So Nvidia may yet show us that it has peaked... and that perhaps the AI boom has peaked along with it.
The semiconductor industry has already taken it on the chin. The benchmark VanEck Semiconductor Fund (SMH) peaked in June and has recently traded as much as 33% below its all-time high close – deep in bear market territory.
In the June issue of The Ferris Report, I told subscribers about three key trends that will affect how the AI boom will end. I called them the squeeze (interest rates), the flood (new shares from initial public offerings), and the peak (market action like what we've talked about today).
I'm still watching those today. In next week's issue of The Ferris Report, I'll update subscribers on this idea and show why the current moment is loaded with risk and uncertainty and why gold's recent price action is very important for investors to note right now. If you're not already a subscriber, you can learn more about signing up here.
For the past few weeks, I've been warning that the AI boom might be done...
And the market has done its best to prove me right. Since my October 23 Digest titled "An 'AI Vanity' Bonfire," the S&P 500 has been down as much as 3.5% but is about flat now. The Nasdaq Composite Index is down about 2%.
Meanwhile, leading AI stalwart Nvidia, which was the heaviest-weighted stock in the S&P 500, is down 22% since October 23. It's trading roughly 30% below its October 5 all-time closing high. In other words, it took a month to push the No. 1 AI darling from new all-time highs to being down 30%.
Bulls will remind me that the market has risen after 19 out of the past 19 midterm elections. They'll assert that my concerns about the end of the AI boom are misplaced.
I'll point them back to our earlier observation that several AI stalwarts have been absolutely bludgeoned. They're not correcting. They're in bear markets. Oracle (ORCL) is down 60% from its highs. CoreWeave is trading 69% below its 2025 highs, despite its 25% rally on Wednesday.
The market has wrecked them because the "AI miracle" has failed to materialize in the form of stellar financial outcomes.
Remember, we can all be right about AI being the most transformational technology in history... and still be dead wrong about the most popular AI stocks as investments. Nobody would deny that the Internet has changed the way we all live and work. Nor can they deny that dozens, maybe even hundreds of companies, big and small, went bust after the dot-com bubble peaked.
I remember that during the dot-com boom, if somebody criticized telecommunications giant Lucent Technologies, they'd be greeted with a smug comment like, "It's Lucent!" There was no way such a well-loved, highly valued company could ever go bust. It never went bankrupt, but its stock cratered from $84 per share to $0.56.
Suggesting anything like that could happen to Nvidia would certainly be greeted with the same smug reaction today. Check back with me in three years and we'll see how that works out.
Apple's return to the top spot in the S&P 500 is pretty typical, too...
The market tends to rotate into seemingly safer names when the more speculative ones start dropping.
Apple grew earnings per share 20% last fiscal year after two years of 10% growth preceded by one flat year. Folks were saying Apple couldn't grow anymore. It proved them wrong, but trading at 40 times earnings suggests it can't keep this up for several years. And folks are now putting roughly 8% of their bi-weekly 401(k) contributions into it thanks to its weight in the S&P 500.
Criticizing the biggest stock in the S&P 500 should be a no-brainer for just about any analyst because those stocks are destined to disappoint...
As Research Affiliates said in its 2012 paper "The Winner's Curse: Too Big to Succeed?":
For investors, Top Dog status – the #1 company, by market capitalization, in each sector or market – is dismayingly unattractive. We find a statistically significant tendency for top companies in each sector to underperform both the overall sector and the stock market as a whole. In an earlier U.S.-only study, we found that 59% of these Top Dogs underperformed their own sector in the next year, and two-thirds lagged their sector over the next decade. We found a daunting magnitude of average underperformance, averaging between 300 and 400 [basis points] per year, over the next 1 to 10 years.
No matter who the top dogs are, allocating nearly 40% of your money to them means you're signing up for a "dismayingly unattractive" proposition, virtually guaranteed to generate massive underperformance over the next year and decade.
That's not a pretty picture for 401(k) contributors.
Fortunately, we're not in the business of telling you to mindlessly invest in index funds. We focus on good businesses with excellent prospects trading at attractive valuations. We recommend you do the same.
New 52-week highs (as of 11/12/26): Berkshire Hathaway (BRK-B), W.W. Grainger (GWW), Johnson & Johnson (JNJ), Mobility Global (MBGL), Republic Services (RSG), Tradeweb Markets (TW), and Invesco DB U.S. Dollar Index Bullish Fund (UUP).
In today's mailbag, we settle a couple's bet about yesterday's Digest and share more feedback on the content of the issue... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"So, my wife and I have a bet going about the title of your Digest article 'The Jacket Comes Off' on Nvidia's well-respected CEO's fall from grace due to his recently revealed poor judgment. She says your title was originally 'The Pants Come Off' until an editor toned it down. I say that Corey would never be so crass. Does she owe me a dinner?" – Subscriber Jim H.
Corey McLaughlin comment: Your wife owes you dinner, Jim.
The title of yesterday's Digest was always a reference to Huang's trademark leather jacket, and my editor didn't have to save me from myself this time.
But I like the way your wife thinks. She read the title exactly the way it was meant to be read, just one garment further than I took it.
"Corey, in today's Digest you said 'Lutnick has kept a low profile since tariffs became a thing of the past, really.'
"Good to know. Please tell it to my colleague Mike, who owns a case goods factory in Canada, and who faces extinction in the coming months because they have gone from zero to 50% tariffs after the recent spat.
"Or to me – I lost a couple million dollars' worth of orders for my small lighting company this fall, about half or more of this year's revenue, because of the 50% tariffs on China and also the 350% arbitrary anti-dumping boondoggle on plate glass that Mar-a-Lago gave to some U.S. glass company on Chinese glass, and it pulled in mirrors that have built-in lights.
"The misreporting of tariff numbers in the last couple of years has been shocking. The WSJ reports numbers that are off by a factor of three. High-profile, highly intellectual pundits like Ezra Klein and Rory Stewart follow the pack and repeat the slop that journalists recycle from each other, e.g. the myth that the tariffs went away because of the Supreme Court striking down the IEEPA duties. For a moment we went from 60% down to 40% on that ruling, but overnight Trump added back 10% and took it back to 50%. All it takes is one call to an importer to find out the facts." – Subscriber Dino V.
Corey comment: Fair point, Dino, and that line was poorly worded on my part.
I'm sorry to hear what the tariffs have done to your business and your colleague's. We've heard from plenty of other small-business owners, too, over the past year or so about how tariffs have been, and still are, a huge issue.
What I meant is that Commerce Secretary Howard Lutnick has kept a low profile since he stopped being the public face of the tariff rollouts. The tariffs themselves are not a thing of the past, as you know firsthand.
"In the Stansberry Digest yesterday, it's stated:
Speaking of AMD... Our colleague Greg Diamond, editor of Ten Stock Trader, just closed a 217% gain on an AMD trade in four days. It's part of a textbook post-midterm-election "Doubling Window" that we've been telling you about...
"But on 11/9, AMD closed at [$508.58]. Yesterday it closed at $585.30, impressive, but not a 217% gain. Please advise." – Subscriber Ron K.
Corey comment: Good question, Ron. Greg's trade was in options, not just owning shares themselves.
As you noted, Advanced Micro Devices' (AMD) stock rose about 15% over that stretch. Options let a trader control shares for a fraction of the upfront cost, so a move like that in the stock can mean a much bigger percentage gain on the option. In this case, it was 217%.
Of course, we should point out that leverage cuts both ways. An option can lose much or even all of its value if the stock doesn't move the right way at the right time. That's why we suggest you follow expert guides, like Greg, on these sorts of trades.
Greg took his AMD gain off the table ahead of Nvidia's earnings next Tuesday, and he has already mapped out a plan depending on whether stocks grind higher or pull back from here. Plus, he's ready to recommend more trades as he tracks the "Doubling Window."
You can learn more about his approach and how to get his next trades right here.
Good investing,
Dan Ferris
Medford, Oregon
November 13, 2026
