Nvidia’s Rollercoaster: A Lesson in Market Timing for Investors
Since the launch of ChatGPT, Nvidia (NASDAQ: NVDA) has experienced remarkable growth, witnessing an impressive $3 trillion increase in market value this year. However, some notable investors have chosen to cash out, believing better opportunities exist elsewhere.
Big Investors Exit Nvidia
A group of billionaire investors took advantage of Nvidia’s initial success by selling off their shares. These investors included David Tepper of Appaloosa Management, Israel Englander of Millennium Management, Ken Griffin of Citadel Advisors, George Soros of Soros Capital Management, and Stanley Druckenmiller, who previously led Duquesne Capital Management for over 20 years.
Druckenmiller was among the early believers in the AI potential of Nvidia. He first purchased shares in the fourth quarter of 2022, anticipating that the surge of interest in AI, marked by the release of ChatGPT, would drive demand for Nvidia’s GPUs. Yet, as the stock soared throughout 2023 and 2024, he decided to sell, suggesting that the market had caught up with the value he once saw. In May, he remarked, “A lot of what we recognized has become recognized by the marketplace now,” hinting at what he felt was limited future potential when he sold his shares in March.
Image source: Getty Images.
Druckenmiller Reflects on His Decision
Months later, Druckenmiller expressed regret over his Nvidia sales. In a Bloomberg interview, he called his decision a “big mistake,” noting that he sold most of his shares while the stock was priced between $80 and $95 (post-split). Now, Nvidia’s stock sits above $130, reflecting a 50% increase since his exit.
Initially, Druckenmiller saw Nvidia as a long-term investment and had held as much as 9.5 million (post-split) shares, valued at about $400 million at the end of Q2 2023. However, his selling spree began with 754,000 shares in Q3 2023 and continued through 2024 until he liquidated his remaining shares. Using end-of-the-quarter prices, it’s estimated that he missed out on around $500 million by parting with Nvidia too soon.
Looking Forward: Nvidia’s Future
Despite regrets over his past choices, Druckenmiller remains optimistic about the AI sector’s future. He stated, “We are long-term believers in AI, and there are still many ways we’re playing AI.” He acknowledged Nvidia as a “wonderful company” and hinted that if prices were to drop, he would consider re-entering the stock.
Even with a high price-to-earnings ratio of 65, Nvidia’s performance shows it’s warranted. The company continues to report substantial revenue growth, having more than doubled its income for five consecutive quarters. CEO Jensen Huang described the demand for its new Blackwell platform as “insane,” with production already fully booked for the next year.
Druckenmiller may not find another entry point at a price he deems appropriate, but his admission of underestimating Nvidia’s potential may reassure current investors. With the Blackwell platform taking off, Nvidia’s prospects remain quite promising.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends 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.
