Investors are grappling with the decision to sell or hold onto their shares in NVIDIA Corp. (NASDAQ:NVDA), following the company’s astronomical rise and recent stock dive.
What Happened: Nvidia’s stock soared over 200% in 2023, largely due to the artificial intelligence buzz. However, the stock took a hit, diving more than 5% on Friday and an additional 2% on Monday. Despite these dips, the stock is still up by around 73% this year, CNBC reported on Wednesday.
Some investors, such as Vahan Janjigian, chief investment officer at U.S.-based Greenwich Wealth Management, have already sold part of their Nvidia shares due to concerns over the stock’s valuation. Janjigian has instead chosen to invest in Nvidia through exchange-traded funds.
Janjigian says he had a "big position" in Nvidia until recently. "But I got a little nervous because I do think the stock is overvalued, especially when you look at it on a price-to-sales basis. It's selling for about 35 times sales, which is very high compared to some of the other technology companies," he said, according to the report.
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Paul Gambles, the managing partner of MBMG Family Office Group, advised selling Nvidia immediately, predicting a possible 50% to 90% decline “soon”. He also suggested that investors should have been buying puts when they were cheaper, given Nvidia’s sometimes high volatility.
He said, "Although whether that happens now or next year is pretty much impossible to tell but precedent would indicate that it's time to be worried – the longest spell without an ‘event' was 2012-2018."
On the other hand, Louis Navellier of Navellier and Associates remains bullish on Nvidia, stating that it’s not time to sell any Nvidia shares yet. After Nvidia’s recent selloff, he reiterated his position, indicating no plans to sell Nvidia and predicting it to be a $1,000 stock in the upcoming months.
Why It Matters: Nvidia’s recent performance and the differing investor opinions highlight the volatility and risks tied to high-momentum stocks, particularly those driven by the AI sector. Nvidia’s stock surge and subsequent decline serve as a cautionary example of the swift and sometimes unpredictable nature of stock market fluctuations.
Furthermore, the AI sector has been a significant driver of the stock market, with both the U.S. and China investing billions into their respective AI capabilities. This has led to concerns about a potential correction in the AI trade, particularly given Nvidia’s recent stock reversal.
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