A veteran tech investor has been reducing his holdings of NVIDIA Corp. NVDA, citing concerns over the company’s growth prospects.
What Happened: Paul Wick, an investor at Seligman Investments, has been gradually decreasing his Nvidia holdings in the past few weeks due to uncertainties surrounding the company’s future earnings, reported Bloomberg.
Wick, who has been investing in the tech sector for nearly three decades, voiced his reservations at a UBS Group AG event in Singapore on Friday. "Our enthusiasm has moderated somewhat over the last one to two weeks," he said.
Wick drew parallels between Nvidia and Cisco Systems Inc.‘s boom during the dot-com bubble. He highlighted the high valuations and lack of recurring revenue as factors that make their businesses inherently riskier.
He also pointed out that Nvidia’s revenue is heavily reliant on its top 10 customers, making it "inherently a much riskier company than Microsoft or Google who have very low customer concentration and thousands upon thousands of customers.”
Despite Nvidia’s recent surge in share price, Wick and a few other investors, including Rob Arnott of Research Affiliates LLC, are skeptical about the sustainability of this rally. Nvidia’s current valuation is higher than all but one of its peers in the Philadelphia Semiconductor Index.
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Wick emphasized that Nvidia must demonstrate that its rapid earnings growth can continue at a robust pace. However, the stock remains one of the top holdings in his fund, which has outperformed 97% of its peers over the past three years.
Why It Matters: Despite Nvidia’s impressive performance, the company’s high valuation has left investors debating whether to cash in or hold on for additional gains. The stock’s recent rally has also led to concerns about its sustainability, with some investors wary of its high valuation.
Earlier this week, Nvidia surged past Apple and Microsoft to briefly become the most valuable company in the world. Analysts predict that the company will be the first to reach a market capitalization of $4 trillion, attributing its success to its dominance in providing chips for AI applications.
In a recent shareholder meeting, Masayoshi Son, the founder of SoftBank Group, expressed regret over the decision to sell the company’s stake in Nvidia in 2019. This move resulted in SoftBank missing out on a potential $157 billion windfall, based on the current share price of the semiconductor designer.
Price Action: At the time of writing, Nvidia shares were down 4.37% at $125.06 on Friday, according to Benzinga Pro.
Image Via Shutterstock
This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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