Seasoned technology investor Paul Wick of Seligman Investments has been reducing his holdings in Nvidia Corp. in recent times. During a video call at a UBS Group event in Singapore, Wick expressed doubts about Nvidia’s future earnings growth, comparing it to Cisco Systems during the dot-com bubble. He highlighted Nvidia’s reliance on its top customers for 60% to 70% of its revenue, making it riskier compared to other tech giants like Microsoft and Google with lower customer concentration.
Despite Nvidia’s recent surge in stock value and temporary status as the world’s most valuable company, investors like Wick and Rob Arnott of Research Affiliates are skeptical about the sustainability of this growth. Nvidia’s current valuation at 43 times projected earnings for the next year is higher than most of its industry peers in the Philadelphia Semiconductor Index.
As the manager of the $13.5 billion Columbia Seligman Information and Technology Fund, Wick also mentioned concerns about generative AI companies investing in Nvidia systems that show low returns on invested capital. Several of Nvidia’s largest customers are reportedly designing their own processors, such as Google, Microsoft, and Metaplatforms.
Despite these reservations, Nvidia remains a top holding in Wick’s fund, which has been outperforming 97% of its peers over the past three years. Wick’s caution about Nvidia’s future earnings growth and its reliance on a limited number of customers indicate a shift in sentiment towards the tech giant, reflecting broader uncertainties in the technology sector.
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