Nvidia Stock Fell After Peter Thiel Dumped His Stake. Why ‘Everyone’ Is Selling.

Nvidia chips are the favored choice for training artificial-intelligence models. (David Paul Morris/Bloomberg)

Key Points

• Nvidia shares decreased 1.2% to $187.95 in premarket trading, despite a 1.8% rise on Friday.
• Thiel Macro LLC sold its entire stake of 537,742 Nvidia shares during the quarter ended Sept. 30.
• Analysts anticipate Nvidia will report adjusted earnings of $1.23 per share on $54.83 billion in revenue for the October quarter.

Nvidia stock was edging lower early on Monday after billionaire Peter Thiel’s fund sold its stake in the chip maker.

Nvidia stock dropped 1.9% to $187.34 in early trading, while the S&P 500 slumped 0.9%, and the Dow Jones Industrial Average slumped 1.2%. Nvidia stock rose 1.8% on Friday, as a surge of buying turned around earlier losses.

In a 13-F file for the quarter ended Sept. 30, Thiel’s hedge fund Thiel Macro LLC revealed it had sold all 537,742 shares it held in Nvidia. Softbank disclosed last week that it had sold its entire stake in Nvidia.

Worries about AI overinvestment are spreading according to the findings of Bank of America’s November global fund manager survey. For the first time since August 2005, a majority (net 20%) of investors in the fund manager survey say companies are overinvesting, the BofA survey said. “This jump is driven by concerns over the magnitude and financing of the AI capex boom,” it said.

Large technology companies such as Google, Amazon.com, Meta Platforms, and Microsoft are currently using around 95% of their operating cash flows on capital expenditures, buybacks, and dividends. That compares with around 80% in 2019, according to Goldman Sachs, with the main driver of the increase being raised capex.

Even as real-money investors leave Nvidia stock, analysts expect the company to deliver impressive earnings after the market close on Wednesday.

Nvidia is expected to report adjusted earnings of $1.23 a share on revenue of $54.83 billion for the October quarter, according to a FactSet poll of analysts.

“Given trends we’re seeing across hyperscalers, neoclouds, and frontier labs, we see no reason to believe that demand is slowing down, and to that end, we would posit the market is underestimating the sheer overwhelming demand for compute over the next few years,” wrote D.A. Davidson analyst Gil Luria in a research note.

Luria reiterated a Buy rating and $250 target price on Nvidia stock.

“Another solid beat-and-raise is in the cards, in our view, with the magnitude of potential upside again likely being governed by the extent to which Nvidia’s supply chain can scale up in a 3-month period,” wrote J.P. Morgan analyst Harlan Sur in a research note.

Sur has a Overweight rating and $215 target price on Nvidia stock.

Among other chip makers, Advanced Micro Devices was down 0.5% and Broadcom was up 1.3% in morning trading.

Write to Adam Clark at adam.clark@barrons.com