Nvidia (NVDA +5.93%) has been the source of some incredible gains in both 2023 and 2024. However, some savvy investors are starting to sell, just in case Nvidia can't live up to the lofty expectations built into the stock. These investors include some billionaire hedge fund managers, such as David Tepper, who runs Appaloosa Management.
Is it time to follow suit? Or is there more upside for Nvidia?
Billionaires are starting to take profits
If a portfolio of a hedge fund or public company has over $100 million in holdings, the entity must report these holdings quarterly to the SEC, which then makes that information publicly available 45 days after the quarter ends. So this information isn't always fresh. David Tepper and Appaloosa could have sold their chunk of Nvidia stock as early as April 1, even though we didn't learn about it until August 15.
NASDAQ: NVDA
Key Data Points
But the report gives investors insights into what the big money on Wall Street is doing. In Q2, Appaloosa reduced its holdings in Nvidia by nearly 85%. Nvidia now makes up just 1.4% of the total investment portfolio. Appaloosa is not alone, either. Billionaire Ken Griffin, head of Citadel Advisors, sold off about 80% of his Nvidia stake in Q2.
While these sales may concern some investors, they shouldn't. Managing a hedge fund isn't like having an individual portfolio. Managers have to answer to their clients each quarter, so when they have a chance to lock in huge gains, they take it. Individual investors don't have to play the quarterly game, so holding through ups and downs isn't as much of a problem.
So is now the right time for individual investors to sell?
Nvidia is still growing at unreal speeds
Nvidia recently announced its results for the second quarter of 2025 (ended July 28), and once again, they were incredible. Revenue rose 122% year over year to $30 billion, with the data center business continuing to lead the way. That segment totaled more than $26 billion in quarterly revenue, up 16% from the previous quarter and 154% from the previous year. Guidance for Q3 was also strong, with revenue projected at around $32.5 billion.
So the core business is still growing at unreal speeds and succeeding, but can it live up to the valuation expectations? The current estimates are for Nvidia to generate about $2.75 in earnings per share for its fiscal 2025. That means the stock trades for around 44 times full-year estimates. That's expensive, and year-over-year growth will slow as Nvidia starts to come up against tougher comparisons.
With analysts expecting $3.81 in earnings for fiscal 2026, the stock is valued at 32 times next year's earnings. That is by no means cheap, and it shows the lofty expectations baked into the stock. While Nvidia may hit those projections, the valuation may come down as investors begin to worry that Nvidia will fall short. Additionally, if Nvidia's growth slows, these valuations will become far too high, and the stock will sell off.
So there's a lot more risk in Nvidia stock than reward right now, and billionaires have recognized this and reduced their exposure substantially. I don't think this is a bad move, and it is one that individual investors should begin considering. Plenty of other fantastic investments are much more reasonably priced.
