Paul Wick, an investor at Seligman Investments, has been reducing his holdings of Nvidia Corp. in recent weeks due to concerns about the company’s earnings growth potential. Wick, who has been in the technology sector for about thirty years, compared Nvidia’s situation to that of Cisco Systems Inc. during the dot-com bubble, citing high valuations and lack of recurring revenue as risk factors.
Nvidia derives a significant portion of its revenue from its top ten customers, making it riskier compared to companies like Microsoft or Google with more diversified customer bases. Despite Nvidia’s recent surge in the stock market due to optimism about artificial intelligence, some investors like Rob Arnott of Research Affiliates LLC are skeptical about the stock’s future performance.
The chipmaker is currently trading at a high valuation of 43 times projected earnings for the next year, outpacing most of its peers in the Philadelphia Semiconductor Index. Wick pointed out that companies utilizing Nvidia systems for generative AI technology have seen low returns on their investments, and highlighted that some of Nvidia’s biggest clients are developing their own processors.
While Nvidia remains one of the top holdings in Wick’s fund, which has outperformed 97% of its peers in the past three years, he emphasized the importance of Nvidia demonstrating continued growth momentum. Wick’s cautious approach towards Nvidia reflects a broader sentiment among some investors who are wary of the stock’s future prospects in light of its high valuation and competitive landscape in the semiconductor industry.
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https://finance.yahoo.com/news/nvidia-stake-trimmed-veteran-tech-074245426.html
