Naver shares tumble 11% in two days as Jensen Huang scandal, profit slump hit sentiment

Naver's share price has plunged 11.4 percent over the past two trading sessions, shrinking the company's market capitalization to the 26 trillion won ($19.5 billion) range.

The sell-off reflects a double blow: the fallout from the resignation of Nvidia CEO Jensen Huang — Naver's third-largest shareholder — and a sharp drop in third-quarter operating profit.

According to Korea Exchange, Naver shares fell 6.43 percent on Thursday before closing down another 5.28 percent Friday. The company's market capitalization, which had been approaching 30 trillion won, shrank to the 26 trillion won range.

The central source of market anxiety is what analysts are calling the "Jensen Huang risk." Nvidia completed a roughly $1 billion paid-in capital increase — acquiring a 4.3 percent stake — and joined Naver as its third-largest shareholder last month.

Huang had personally visited Naver's headquarters and built a close relationship with Naver Global Investment Officer Lee Hae-jin, fueling expectations for deeper cooperation between the two companies.

His departure from Nvidia following an extramarital affair scandal has now cast a shadow over Naver's stock.

Analysts say the immediate business partnership is unlikely to unravel, but given the outsized influence and symbolic weight Huang carried at Nvidia, the sharp chill in investor sentiment is understandable.

The two companies are currently working with global investment firm Brookfield to build a 1-gigawatt AI factory network.

Under the arrangement, Naver Cloud — a wholly owned subsidiary of Naver — operates the AI factory business; Brookfield provides financing of up to $9 billion through a special purpose company; and Nvidia supplies GPUs and handles technology cooperation.

Using its Gak Sejong data center in Sejong as a base, Naver plans to launch a 55-megawatt AI factory in the first half of next year and expand it to 200 megawatts by 2028.

With equity investment and infrastructure contracts already in place, analysts expect no major disruption to the project's continuity. However, they note that future infrastructure expansion and next-generation GPU procurement could be subject to the judgment of Nvidia's new leadership.

Deteriorating core-business profitability added further pressure on the stock. Naver's consolidated revenue for the third quarter came in at 3.47 trillion won, up 10.7 percent from a year earlier, but operating profit fell 20.9 percent year-on-year to 451.3 billion won.

Despite top-line growth, profit retreated sharply because operating expenses rose 17.7 percent year-on-year to 3.02 trillion won. Infrastructure costs surged 29.1 percent on higher depreciation and floor-space charges tied to new computing assets, while marketing expenses climbed 32.3 percent on shopping promotions and partner costs rose 18.8 percent — reflecting the rollout of the offline payment terminal Npay Connect and sports broadcasting rights fees. The overall operating margin fell to 13 percent, down from 18.2 percent a year earlier.

Margins at Naver's core cash-generating units — its platform and financial platform businesses — also declined.

Brokerages have been cutting their price targets in response. SK Securities lowered its target from 320,000 won to 260,000 won, while Meritz Securities trimmed its target from 330,000 won to 270,000 won.

Nam Hyo-ji, an analyst at SK Securities, said near-term margin improvement would be difficult given rising costs from expanding offline terminal deployment, investments to strengthen delivery competitiveness and growing AI infrastructure expenses. "The growth potential of new businesses is positive, but it will take time before they contribute meaningfully to profit, while cost burdens from existing businesses are being front-loaded," Nam said.

Lee Hyo-jin, an analyst at Meritz Securities, said margins at the profitable platform and financial divisions had fallen to two-thirds and less than half of their year-earlier levels, respectively. "We are in a phase where profit erosion from existing businesses due to investment expansion is more clearly foreseeable than any confirmation of results from new ventures," Lee said.

Ultimately, analysts say the key question is how quickly the AI factory business can offset the slowdown in Naver's core operations.

Jeong Eui-hun, an analyst at Eugene Investment & Securities, said the company's structure now requires the AI factory to compensate for the deceleration in its legacy business. "The company has projected margins well into double digits from 2028 onward, following the commercial launch of services in the first half of next year. But since early customers are expected to be emerging AI startups rather than big tech firms, concerns about contract fulfillment and demand sustainability remain," Jeong said.