Huang is selling his Nvidia shares like it’s going out of style. But there’s more to the story.
Investors love to see key company insiders buying stock. It indicates they have confidence in the company’s future. On the other hand, when insiders sell it can cause concerns that maybe they know something that outsiders don’t.
That leads me to Nvidia (NVDA 12.81%). The GPU maker’s CEO, Jensen Huang, sold $296 million of Nvidia stock in July. Should investors be worried?
Selling like it’s going out of style
Huang didn’t trim his stake in Nvidia once or twice in July. He sold Nvidia shares 20 times during the month. There were only two trading days when he didn’t sell any shares.
As you can guess from the total amount sold, we’re not talking about small-dollar transactions here. Huang’s sales of Nvidia stock made him between $13.6 million and $16.1 million per trade.
| Date | Shares Sold | Proceeds |
|---|---|---|
| July 1, 2024 | 120,000 | $14.7 million |
| July 2, 2024 | 120,000 | $14.7 million |
| July 3, 2024 | 120,000 | $14.9 million |
| July 5, 2024 | 120,000 | $15.3 million |
| July 8, 2024 | 120,000 | $15.4 million |
| July 9, 2024 | 120,000 | $15.7 million |
| July 10, 2024 | 120,000 | $16.1 million |
| July 11, 2024 | 120,000 | $15.7 million |
| July 12, 2024 | 120,000 | $15.6 million |
| July 15, 2024 | 120,000 | $15.5 million |
| July 16, 2024 | 120,000 | $15.2 million |
| July 17, 2024 | 120,000 | $14.3 million |
| July 18, 2024 | 120,000 | $14.4 million |
| July 19, 2024 | 120,000 | $14.3 million |
| July 22, 2024 | 120,000 | $14.7 million |
| July 23, 2024 | 120,000 | $14.8 million |
| July 24, 2024 | 120,000 | $14.1 million |
| July 25, 2024 | 120,000 | $13.6 million |
| July 26, 2024 | 120,000 | $13.6 million |
| July 29, 2024 | 120,000 | $13.6 million |
Data sources: SEC filings.
Nvidia’s CEO sold the same number of shares each time. Earlier in the month, his proceeds were higher because the stock was rising. Later in July, his proceeds fell as Nvidia’s share price tanked.
Huang-ing investors out to dry?
Is Huang bailing on Nvidia while he’s promoting the chipmaker’s prospects to outside investors? Not really.
The CEO’s sales were all related to restricted stock units (RSUs) and performance stock units (PSUs). These are stock grants tied to Huang’s compensation. RSUs are commitments by an employer to grant shares to an employee at a specified future date provided certain conditions are met. PSUs are shares awarded to an employee based on company performance.
Huang regularly sells RSUs and PSUs. Other Nvidia executives and board members do too. However, these sales shouldn’t be interpreted as reflecting a lack of confidence in the company.
While $297 million is a lot of money, it’s small compared to Huang’s overall stake in Nvidia. As of March 25, 2024, he owned nearly 93.5 million shares with a current value of roughly $9.7 billion.
No need to worry
The bottom line is that there is no need to worry at all about insider selling by Nvidia’s leaders. But should investors worry about Nvidia’s recent sharp pullback? I don’t think so.
Nothing about Nvidia’s business or prospects has changed over the last few weeks. I suspect the company will announce another round of impressive revenue and earnings growth in its next quarterly update on Aug. 28.
Nvidia’s story could get even better with the upcoming launch of its Blackwell GPU platform. Huang has said Blackwell “will likely be the most successful product in our history and even in the entire computer history.” He’ll probably be proven right at least on the first part of that statement.
Keith Speights 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.
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