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Jensen Huang, the CEO of Nvidia, is currently divesting hundreds of thousands of shares he owns in the company.
This raises a critical question: is it wise to hold or even buy NVDA shares if the CEO is offloading his stakes in such a significant manner?
In essence, can the stock of this renowned chip manufacturer, a global leader in AI technology, continue to rise, potentially increasing the returns for its shareholders?
In just two years, Nvidia’s market capitalization has soared from $358 billion to an astonishing $2.61 trillion, marking a staggering increase of 360%.
However, recently, the stock price has started to decelerate due to concerns surrounding antitrust violations and speculations about a potential AI bubble burst.
According to filings submitted last week to the SEC, Huang sold over $633 million worth of shares, averaging about 120,000 shares daily from June 13 to September 5.
In total, he has offloaded nearly 5.3 million shares.
Notably, in July alone, Huang sold $322.7 million in Nvidia stock right before a significant sell-off that impacted technology stocks amid disappointing quarterly performance and worsening macroeconomic data.
These sales are part of a pre-established plan that Huang outlined back in March.
The AI chip manufacturer has faced significant market fluctuations recently.
Just last week, geopolitical tensions and legal challenges led to a massive one-day market capitalization decline of $279 billion.
The U.S.
Department of Justice has even taken legal action against Nvidia on antitrust issues.
Despite these challenges, numerous analysts believe that Nvidia’s stock still holds substantial upside potential.
Unlike the dot-com bubble, where many companies surged based solely on hype without validating their business models, AI is now a crucial component in numerous industries.
Market estimates suggest the AI sector will be worth $214.6 billion in 2024, skyrocketing to $1.339 trillion by 2030.
Nvidia appears well-positioned to capitalize on this AI boom, as its chips are essential for various AI models across sectors, including cloud computing.
This high demand for its H100 graphics cards underscores the company’s strategic advantage.
Moreover, unlike stocks during the Internet bubble, Nvidia boasts solid fundamentals, alleviating fears of an impending bubble.
The company has proficiently generated profits, with a return on equity (ROE) nearing 120%, significantly exceeding the semiconductor sector’s average of 73.2%.
An ROE above 100% indicates that the company’s net income surpasses its equity, reflecting exceptional performance.
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