Stanley Druckenmiller of the Duquesne Family Office expressed feelings of regret after exiting his position in Nvidia.
Stanley Druckenmiller is a billionaire hedge fund manager for the Duquesne Family Office. Like many of his peers, Druckenmiller’s trading activity garners a lot of attention from the retail investing community.
Recently, the accomplished investor admitted something rather startling during an interview with Bloomberg: His fund exited its position in Nvidia (NVDA 0.61%).
I’ll break down Druckenmiller’s move and provide my honest views on why buying or selling Nvidia stock right now could make a lot of sense.
Druckenmiller’s honest take on Nvidia
In the clip posted on social media platform X, Druckenmiller admits that he thinks selling Nvidia was a “big mistake” — a sobering comment indeed.
However, Druckenmiller’s reasons for selling Nvidia seem to revolve around valuation. He explains that the stock price had tripled in a year’s time, and such a premium valuation inspired the profit taking.
$NVDA Druckenmiller says selling Nvidia was a “big mistake.”
“I’ve made so many mistake in my investment career, one of them was I sold all my Nvidia probably somewhere between $800 and $950.”
“Yes, I think Nvidia is a wonderful company and were the price to come down we’d get… pic.twitter.com/egL9SBZJCA
— Hedge Vision (@HedgeVision) October 16, 2024
Why it might seem too early to sell
Nvidia’s position in the artificial intelligence (AI) is quite important. The company’s graphics processing unit (GPU) chipsets are important pieces of hardware for generative AI infrastructure. Moreover, Nvidia’s compute unified device architecture (CUDA) software layers on top of its GPUs — helping the company build an end-to-end suite of tightly integrated AI protocols.
The combination of industry-leading GPU technology has helped Nvidia generate record revenue and profit growth, and the company’s momentum doesn’t appear to be slowing down. In fact, Nvidia’s next-generation chips — the Blackwell series — could be a $10 billion product by year-end, according to early estimates published by Morgan Stanley.
As of this writing, shares of Nvidia are hovering around $142 — a fresh all-time high. The company’s bright outlook featuring Blackwell and ongoing secular demand for chips make Nvidia stock look like a no-brainer, and may give credence to the idea that Duquesne shouldn’t have exited its position.
Nevertheless, this is only part of the story. There are some important ideas to consider before going all in on Nvidia.
Image source: Getty Images.
Why Druckenmiller’s decision could be a wise one in the long run
There is no doubt that Druckenmiller left profits on the table. However, it’s important to discern how much of Nvidia’s price appreciation is tied to the performance of the business versus a broader sense of optimism from investors.
As of now, the financial results generated from the Blackwell GPUs have not been reflected in Nvidia’s earnings reports. To me, there is a good chance that some of the hype from the new products are already baked into Nvidia’s stock price.
Furthermore, Druckenmiller is far from the only billionaire investor who has been selling Nvidia stock. During the second quarter, Ken Griffin’s Citadel and David Shaw’s D. E. Shaw also reduced their respective positions in Nvidia stock.
Additionally, David Tepper of Appaloosa Management recently explained that his fund sold a chunk of its Nvidia position due to uncertainty about the company’s performance in the long-run.
I think institutional investors aren’t completely sold that Nvidia will remain as the top player in the GPU realm. Many of Nvidia’s customers, including Microsoft, Alphabet, Amazon, Tesla, and Meta Platforms, are working on their own chips.
While I do not think this means Nvidia will lose this business entirely, I would not be surprised to see the company’s growth begin to decelerate amid a larger competitive landscape.
So is Nvidia a buy, sell, or hold?
While I understand Druckenmiller’s disappointment in selling Nvidia stock too early, I also think that the profits left on the table were rather unpredictable. In other words, Nvidia stock’s recent rise doesn’t seem to be connected to concrete fundamentals, but rather savvy marketing leading up to the Blackwell launch.
My stance regarding a position in Nvidia is that money can still be made owning the stock. But that said, timing your investing activity will become increasingly important as more competitive forces come into the picture. Stated a different way, I see Nvidia becoming more of a stock to trade and less of a position to own for the long haul.
As a long-run investor, I don’t want to worry too much about timing my buys and sells. For these reasons, I would be looking for more compelling buy-and-hold opportunities at the intersection of AI and semiconductors.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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