Nvidia (NVDA 1.46%) isn't just a company that makes graphics processing units (GPUs). It also invests in other tech companies that it sees potential in, and one of those was Applied Digital (APLD 4.03%). However, Nvidia recently sold its entire stake in the data center operator, which seems like a huge red flag.
Is there something else going on here? Or do investors have a reason to be concerned by Nvidia's latest move?
Image source: Getty Images.
Portfolio adjustments aren't uncommon for Nvidia
We know Nvidia's investment activity because it has a portfolio of equity investments greater than $100 million. As a result, it is required to file a Form 13F with the Securities and Exchange Commission to disclose its end-of-quarter holdings 45 days after each quarter ends. So, the information that we know now reflects its portfolio as of Dec. 31, 2025.
As of the end of the third quarter, Nvidia owned around 7.7 million shares of Applied Digital, a stake valued at about $177 million at the time. However, it sold all of those shares during Q4.
While investors may be concerned about what led Nvidia to unload that stake, such moves aren't uncommon for the chipmaker. It closed its similarly sized position in ARM Holdings last quarter as well. And at the start of 2025, it did the same thing with its stake in SoundHound AI.
Yet just because Nvidia isn't always a long-term investor in tech companies doesn't mean that you can't be.
The future is still bright for Applied Digital, which builds and operates high-performance computing data centers. The artificial intelligence (AI) infrastructure buildout is continuing at a strong pace as demand for processing power is high, and the data centers that Applied Digital is building are in huge demand. Furthermore, these data centers will provide monster cash flows over the next few years once the buildout is complete. That should result in the stock being a successful investment, as long as Applied Digital can establish itself as a top option for those seeking AI processing power.
NASDAQ: APLD
Key Data Points
During its fiscal 2026 Q2, which ended Nov. 30, Applied Digital's revenue soared by 250% year over year, reflecting the massive demand for its data centers. However, its net loss also rose due to the huge investments it is making in building out capacity to meet the demands of its customer base.
This shouldn't surprise any investors, and if you're going to buy Applied Digital stock, you need to be patient because new data centers don't go up overnight. Applied Digital has a great buildout plan, and customers are already lined up to lease the additional computing power it will eventually be able to provide. I think Nvidia's stock sale is just noise. If you're bullish on Applied Digital, Nvidia selling its shares should not influence your investment thesis.
