The CEO of Nvidia has sold millions of dollars worth of stake in his company this year, and has not yet finished selling.
Nvidia CEO sells 100,000 shares of company shares
Jensen Huang sold 100,000 Nvidia shares between June 20th and 23rd, bringing nearly $15 million at an average price of $144.04 per share.
Cheddar
Investors often see insiders selling, and as a hint that the stock may be in trouble, or perhaps as a hint that there is no room for insiders to raise it. It could raise the red flag of stock, especially if the CEO is involved.
nvidia (NASDAQ: NVDA) It has been the best performing stock for many years, and the company is currently the most valuable in the world. However, its CEO Jensen Huang has recently dropped off its stock in the business. This month he sold hundreds of thousands of shares, but that won’t be the end of the sale. What’s behind his move, and should retail investors also consider cashing in light of them?
Huang’s stock sales are minimal in relation to his overall position at Nvidia
Nvidia’s CEO is selling stocks this year, and there are several reasons why investors shouldn’t be scared.
The first is that his share sales are part of a pre-published plan that he is known to the public. In March, Huang submitted a plan under Rule 10B5-1, which would sell up to 6 million shares. Once such a plan comes into play, it is executed by designated brokers who will make the transaction at preset time. This ensures that sales are not affected by new insider information that executives may have. It is not uncommon for management to periodically unload some of their shares over time, especially if you have a large number of shares in a company. And that certainly doesn’t mean they expect their stock to struggle.
Secondly, even after all these six million shares have been sold, Huang will still hold a considerable position in the company. He currently owns approximately 858 million shares. This is approximately 3.5% of Nvidia’s outstanding shares. He remains its top individual shareholder, with only a few institutions holding more stakes than he. So while these stock sales may seem important, in the context of his overall position, they are not dramatic in any stretch.
Nvidia’s shares are rising and trading at high premiums
Huang stock sales are not a reason to worry about your business. The demand for Nvidia’s artificial intelligence (AI) chips remains strong, and there is little reason to worry about its growth still slowing down. Analysts at Grand View Research Project say that the AI chipset market will grow at a combined annual rate of 28.9% by the end of the decade, and Nvidia should be a major beneficiary.
However, investors still need to consider the valuation. Currently, Nvidia is trading at 55 times its subsequent revenues. This is a fairly high multiple, considering the average ratio of the S&P 500 is below 25. Although growth prospects are high, investors should not assume that Nvidia’s dominance in the AI chip market remains dominant in the AI chip market, as their own engineers design custom AI chips. And, given that it trades at a very high premium, expectations are high for the business. In effect, there is a lot of future growth already priced in Nvidia’s stock.
Should I buy Nvidia shares today?
Investors may want to mirror Huang’s recent stock sales and cash out some of their shares now while still maintaining their company position. Nvidia is a market leader and could offer returns that will win the market, even if you don’t think it’s going to double or triple its value in the short term.
While buying and holding positions may still mean a lot to growth investors, if you hold Nvidia stocks today, you could also consider selling some of your positions and booking profits.
David Jagielski has no position in any of the stocks mentioned. Motley Fool has a job at Nvidia and recommends. Motley Fools have a disclosure policy.
The Motley Fool is a partner at USA Today, providing financial news, analysis and commentary designed to help people control their financial lives. The content is produced independently of USA Today.
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