There’s no doubt about that Nvidia (NASDAQ: NVDA) has been the biggest winner in the artificial intelligence (AI) boom. The AI chip stocks have added a whopping $3 trillion in market cap since early 2023, shortly after ChatGPT launched.
However, during the first half of the year there was a surprising rotation out of Nvidia stock. A number of billionaire investors who had benefited from the stock’s initial gains sold AI stock, arguing that there were better opportunities elsewhere.
Those 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 led Duquesne Capital Management for more than two decades.
Druckenmiller, who occasionally discusses his stock prices in interviews, was early to jump on Nvidia’s AI trend. The investor, whose hedge fund delivered an average annual return of 30% when it was active, first bought shares of Nvidia in the fourth quarter of 2022, realizing that the launch of ChatGPT would lead to demand for Nvidia’s GPUs, which were used for AI applications. .
But even Druckenmiller seemed surprised by Nvidia’s dramatic rise in 2023 and 2024, selling out of the high-flying stock ever since. In May, he acknowledged cutting his Nivida position, saying: “A lot of what we recognized has now been recognized by the market.” In other words, he believed the stock’s upside potential was limited when he sold it in late March.
Druckenmiller’s mea culpa
More than six months after that sale, Druckenmiller now has some regrets.
In an interview with Bloomberg, the billionaire said the decision to sell Nvidia was a “big mistake.” He said he sold most of his position when Nvidia was priced between $80 and $95 (post-split) and the shares have now risen past $130, meaning Nvidia’s value has increased by about 50% since he made the majority of his sales.
In 2023, Druckenmiller said he expected to own the stock for years, but he thought the “valuation was rich” after the shares tripled in just a year.
At one point, Nvidia was its largest holding company. At the end of the second quarter of 2023, he held 9.5 million shares (post-split) worth approximately $400 million. It sold 754,000 in the third quarter of 2023, 2.57 million in the fourth quarter of that year, 4.42 million in the first quarter of 2024 and 1.54 million the following quarter. According to the Bloomberg interview, he has since sold his remaining 214,060 Nvidia shares.
It’s hard to know exactly when the Duquesne boss sold those shares, but based on the Nvidia stock price at the end of the quarter of each of his sales, Druckenmiller left about $500 million on the table in Nvidia stock.
A bullish signal for Nvidia
In addition to calling the sale of Nvidia a mistake, Druckenmiller also remained optimistic about the long-term future of AI, saying, “We believe in AI for the long term, and there are still many ways we play AI. ” He also added, “And yes, I think Nvidia is a great company, and if the price came down we would get involved again, but right now I’m licking my wounds from poor sales there.”
Nvidia stock may be expensive with a price-to-earnings ratio of 65, but the company has certainly shown that it deserves to trade at a premium. The company continues to deliver tremendous revenue growth, having more than doubled revenue for five quarters in a row, and demand for the Blackwell platform is “insane,” according to CEO Jensen Huang. The new hardware has already been sold for the next 12 months after it was just released.
Druckenmiller may not get another chance to buy Nvidia at a price that makes sense to him, but Nvidia investors should take comfort in knowing that one of the most influential investors in the market now admits he was wrong to undervalue the company .
With the Blackwell platform off to a flying start, the future for Nvidia still looks as bright as ever.
Should You Invest $1,000 in Nvidia Now?
Before you buy shares in Nvidia, consider the following:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $831,707!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns October 14, 2024
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.
You’re not going to believe what this billionaire investor just said about Nvidia, originally published by The Motley Fool
