Wall Street’s Diverging Views on Nvidia Amid AI Boom
November was a significant month for Wall Street, marked by an active earnings season, Election Day, and crucial economic updates concerning jobs and inflation. These factors contributed to record highs for the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite.
However, investors may have overlooked a critical release during this period. November 14 marked the deadline for institutional investors managing over $100 million in assets to file their Form 13F with the Securities and Exchange Commission. This filing enables everyday investors to see what stocks top asset managers are buying and selling.
Image source: Getty Images.
The recent 13F filings are particularly relevant for those investing in the growing artificial intelligence (AI) sector. According to the report Sizing the Prize by PwC analysts, AI could enhance global GDP by 26% by 2030.
Despite the hype surrounding AI, views on its leading player, semiconductor giant Nvidia (NASDAQ: NVDA), vary among top investors. For instance, Philippe Laffont of Coatue Management has been selling Nvidia shares, while Ole Andreas Halvorsen from Viking Global Investors has been actively purchasing them.
As of September 30, Halvorsen managed over $27 billion in assets spread across 83 stocks. So far this year, Viking Global has bought 2,265,322 shares of Nvidia, accounting for the company’s earlier 10-for-1 stock split in June.
Viking Global’s team believes in Nvidia’s strong market position, innovative products, and effective software integration.
According to TechInsights, Nvidia dominated, shipping about 98% of the graphics processing units (GPUs) to data centers in 2022 and 2023. Despite growing competition in the GPU market, Nvidia appears to maintain its significant market dominance.
The demand for Nvidia’s hardware significantly surpasses supply. Due to this disparity, prices for its sought-after Hopper (H100) GPU have surged 100% to 300% above the price of Advanced Micro Devices Insight MI300X chips, resulting in high gross margins for Nvidia.
Additionally, Halvorsen likely sees potential in Nvidia’s upcoming Blackwell GPU architecture, designed to enhance computing power for AI applications while being energy efficient. Nvidia’s CEO Jensen Huang described the demand for Blackwell as “insane” in an October update.
Nvidia’s CUDA software platform further strengthens customer loyalty. This toolset is crucial for developers building extensive language models and maximizing the performance of Nvidia GPUs.
Image source: Getty Images.
In contrast, not all billionaire investors share optimism about Nvidia. Over six quarters, from March 31, 2023, to September 30, 2024, Coatue’s Philippe Laffont has sold approximately 39.66 million split-adjusted shares of Nvidia, reducing his stake by 80%.
The selling trend could be partly attributed to profit-taking, as Nvidia shares have skyrocketed by 875% since the start of 2023—an impressive rise that prompts many fund managers to take some profits.
However, concerns linger that the selling entails more than just profit-taking.
Historically, major technological innovations often go through a “bubble-bursting” phase. In the last 30 years, we’ve rarely seen a significant new technology avoid a downturn. Given that AI is still evolving, many businesses still lack effective strategies to monetize their AI investments. A downturn in the AI sector could hit Nvidia hard.
Insiders have been regularly selling shares since Nvidia split its stock in June. NVDA Shares Owned By Insiders data by YCharts.
Another factor for Laffont could be the absence of insider purchases. Nvidia’s insiders have not bought any shares on the open market for the past four years. While insider selling isn’t necessarily negative, it indicates potential caution regarding the stock’s value.
Regulatory concerns also loom, especially with the Biden administration’s restrictions on AI chip exports to China. Further complications may arise with the incoming Trump administration potentially imposing tariffs, adding more pressure to Nvidia’s situation.
Laffont might be wary of intensifying competition as well. In addition to AMD increasing its production, some of Nvidia’s top customers are developing their own AI chips. Although these competitors lag behind Nvidia in some areas, they could provide more affordable options, potentially impacting Nvidia’s market share.
While Nvidia’s growth has been remarkable over the past two years, it will be challenging to maintain such momentum amid increasing competition and potential saturation in the AI GPU market.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
