Stanley Druckenmiller of the Duquesne Family Office expressed feelings of regret after leaving his position at Nvidia.
Stanley Druckenmiller is a billionaire hedge fund manager for the Duquesne Family Office. Like many of his peers, Druckenmiller’s trading activity is receiving a lot of attention from the retail investing community.
Recently, during an interview with Bloomberg, the veteran investor admitted something rather surprising: his fund exited its position in Nvidia (NVDA 0.61%).
I’ll break down Druckenmiller’s move and give my honest opinion on why buying or selling Nvidia stock could make a lot of sense right now.
Druckenmiller’s honest look at Nvidia
In the clip posted to social media platform
However, Druckenmiller’s reasons for selling Nvidia appear to revolve around valuation. He explains that the share price had tripled in a year, and such a premium valuation prompted profit taking.
$NVDA Druckenmiller says selling Nvidia was a “big mistake.”
“I’ve made so many mistakes in my investing career, one of which was selling all my Nvidia probably somewhere between $800 and $950.”
“Yes, I think Nvidia is a great company and if the price came down we would… pic.twitter.com/egL9SBZJCA
— Hedge Vision (@HedgeVision) October 16, 2024
Why it may seem too early to sell
Nvidia’s position in artificial intelligence (AI) is quite important. The company’s graphics processing unit (GPU) chipsets are key hardware components for its generative AI infrastructure. Additionally, Nvidia’s Compute Unified Device Architecture (CUDA) software layers sit on top of the GPUs, allowing the company to 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 shows no sign of slowing down. Early estimates published by Nvidia’s next generation of chips – the Blackwell series – could be a $10 billion product by the end of the year. Morgan Stanley.
At the time of writing, Nvidia shares are hovering around $142 – a new all-time high. The company’s positive outlook on Blackwell and continued chip demand make Nvidia stock seem like a no-brainer, and could lend credence to the idea that Duquesne should not have exited his position.
Yet this is only part of the story. There are some key 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 the win on the table. However, it’s important to distinguish how much of Nvidia’s price increase is related to the company’s performance versus a broader sense of optimism among investors.
So far, the financial results of the Blackwell GPUs have not been reflected in Nvidia’s earnings reports. To me, there’s a good chance that some of the hype surrounding the new products is already baked into Nvidia’s stock price.
Moreover, Druckenmiller is far from the only billionaire investor who has sold Nvidia stock. During the second quarter, Ken Griffin’s Citadel and David Shaw’s DE Shaw also cut their respective positions in Nvidia stock.
Additionally, Appaloosa Management’s David Tepper recently explained that his fund sold some of its Nvidia position due to uncertainty about the company’s long-term performance.
I don’t think institutional investors are completely convinced that Nvidia will remain the top player in the GPU space. Many of Nvidia’s customers, including Microsoft, Alphabet, Amazon, TeslaAnd Metaplatformsworking on their own chips.
While I don’t think this means Nvidia will lose this business completely, I wouldn’t be surprised if the company’s growth starts to slow in a larger competitive landscape.
So is Nvidia buy, sell or hold?
While I understand Druckenmiller’s disappointment in selling Nvidia stock too early, I also think the profits left on the table were quite unpredictable. In other words, the recent rise in Nvidia stock does not appear to be related to concrete fundamentals, but rather to clever marketing in the run-up to Blackwell’s launch.
My position on a position in Nvidia is that there is still money to be made from owning the stock. But that said, the timing of your investment activities will become increasingly important as more competitive forces come into view. Put another way, I see Nvidia becoming more of a stock to trade and less of a position to own for the long term.
As a long-term investor, I don’t want to worry too much about the timing of my purchases and sales. For these reasons, I would look for more attractive 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, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, 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 holds positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
