Nvidia Leadership Crisis Shakes the AI Trade as One Investing Club Reshuffles Its Portfolio

Wall Street navigated a turbulent week as a leadership crisis at Nvidia injected fresh uncertainty into the artificial intelligence trade. Even with the upheaval, the S&P 500 posted a weekly gain of 2.5% and the tech-heavy Nasdaq climbed 2.3%, as strong rallies on Monday and Wednesday outweighed declines on Tuesday, Thursday and Friday. Both indexes have now recovered a significant portion of the losses sustained in the postelection market rout on Nov. 5.

Although Nvidia shares slipped another 2% on Friday, the week's closing pressure came from a different source: growing expectations that the Federal Reserve could deliver multiple interest rate hikes over its next few meetings. Before Friday's open, the October producer price index showed a 6.5% year-over-year increase, the highest yearly reading in nearly four years. While wholesale inflation came in cooler than expected month over month, the annual figure commanded attention, especially after a hot consumer inflation report earlier in the week.

Nvidia's stock tumbled nearly 13% for the week, bucking a broader rebound in semiconductor shares. The sell-off began Monday after reports that the chip giant's board was investigating CEO Jensen Huang's relationship with a woman suspected of spying for China. The scandal intensified with reports that Huang had affairs with two Nvidia employees, and he resigned on Thursday. Longtime CFO Colette Kress was named interim CEO, a decision that Jim Cramer welcomed.

The CNBC Investing Club downgraded Nvidia to its hold-equivalent 2 rating on Tuesday. Cramer said he was not looking to buy the dip but was not abandoning the company either, pointing to Apple's success after Steve Jobs and voicing confidence in Kress. Still, he cautioned on Wednesday's "Mad Money" that "a Jensen-less Nvidia is an Nvidia many will not want to own." For longtime shareholders sitting on large gains, he urged capital preservation, saying Thursday: "If you are one of those millionaires, don't become a hundred-thousandaire." Nvidia's next test arrives when it reports earnings Tuesday evening.

The Club also plans to exit its Intel position and use the proceeds to start a stake in rival Advanced Micro Devices once trading restrictions allow, calling Friday's decline in AMD a "terrific opportunity" to buy. The shift reflects confidence in AMD's ability to capture booming demand for data center chips, with Nvidia's turmoil potentially opening the door for AMD to gain share in graphics processing units. The Club also sees AMD as better positioned to meet rising demand for central processing units needed to run AI agents, thanks to flexible chip designs that let it shift resources between personal computers and server processors more easily than Intel, an advantage as rising memory prices weigh on PC demand. Intel was downgraded to a sell-equivalent 3 rating on Wednesday and AMD was added to the Bullpen watchlist, even though the swap means realizing a substantial loss. "Sometimes, you just have to admit you got it wrong," Cramer said.

Several trades last week reduced the portfolio's data center exposure while locking in gains and building defensive positions. On Monday, the Club trimmed Eaton despite strong earnings, realizing a gain of roughly 47%, citing the risk that hyperscalers could scale back spending as data center construction faces growing challenges. It also initiated a position in Constellation Brands, the maker of Modelo and Corona, pointing to an inexpensive valuation, a nearly 3% dividend yield, improving beer sales trends and potential benefits from easing immigration policies.

On Tuesday, the Club sold another 25 shares of Cardinal Health after a rally of roughly 23% since the end of September, locking in a 24% gain while maintaining confidence in the healthcare distributor's long-term prospects.

On Friday, it trimmed TJX Companies following a downgrade from Gordon Haskett, which flagged competition from Ross Stores and lingering execution issues at the Marmaxx division. With earnings due Wednesday morning, the sale protected an average profit of roughly 113%. The proceeds went toward additional shares of Constellation Brands and Kimberly-Clark, whose ability to turn around Kenvue following its acquisition the Club believes investors are underestimating. Cramer favors the pairing of Kimberly-Clark brands such as Huggies and Kleenex with Kenvue household names like Tylenol and Band-Aid.