Experienced technology investor Paul Wick of Seligman Investments has been reducing his holdings in NVIDIA due to concerns about the company’s future profit growth. Wick, who spoke at a USB Group event in Singapore, compared Nvidia’s situation to Cisco Systems during the dotcom bubble, highlighting potential risks.
Wick pointed out that Nvidia relies heavily on its top ten customers for 60-70% of its revenue, making it riskier than companies like Microsoft and Alphabet with more diversified customer bases. Despite Nvidia’s recent surge in stock price driven by optimism around artificial intelligence, Wick remains skeptical about the sustainability of this rally.
Nvidia’s stock currently trades at 43 times its projected earnings for next year, higher than most of its semiconductor peers in the Philadelphia Semiconductor Index. Wick also mentioned that generative AI companies investing in Nvidia systems are seeing low returns on invested capital, and some of Nvidia’s largest customers are developing their processors, potentially reducing their reliance on Nvidia in the future.
However, Nvidia stock remains one of the top holdings in Wick’s fund, which has outperformed 97% of its peers over the past three years. Wick’s $13.5 billion Columbia Seligman Information and Technology Fund continues to hold NVDA stock despite his concerns about the company’s future growth prospects.
In conclusion, while Wick is reducing his holdings in Nvidia due to doubts about its future profit growth and market concentration risks, he still holds the stock in his fund. The concerns raised by Wick highlight the potential challenges Nvidia may face in maintaining its growth trajectory in the competitive technology sector. Investors should carefully consider these factors before making any investment decisions, as the investment in Nvidia and any stocks carries inherent risks.
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https://finbold.com/legendary-fund-manager-trims-nvidia-position-heres-why/
