Nvidia CEO Jensen Huang's Stock Sales: A Closer Look at Recent Transactions

CEO Jensen Huang Keeps Dumping Nvidia Stock. Should You Be Worried? | The Motley Fool

Nvidia (NVDA -1.92%) has been the stock sensation of the artificial intelligence (AI) era, with shares up 700% since the start of 2023. However, there recently has been one potential warning sign that financial media outlets and investors have keyed in on: CEO Jensen Huang is rapidly trimming his stake in the AI leader. Nearly every day for the past few months, Huang has sold Nvidia stock. For example, on Sept. 12 and 13, he sold about 200,000 shares, worth more than $20 million. According to Nvidia filings, Huang's stock sales are based on a predetermined plan known as a 10b5-1 that he entered into on March 14, 2024. The 10b5-1 structure exists so insiders like Huang can sell their company stock without any suspicions of insider trading. Because the transactions are pre-determined and authorized by Huang's brokerage, they're unrelated to the price of the stock, any news, or material non-public information. Investors don't know the exact plan around Huang's 10b5-1, but it's clear it involves frequent Nvidia stock sales from the CEO's holdings. Even though the stock selling was pre-planned, it still shows that Huang is trimming his stake in Nvidia. Notably, Huang also entered into the plan in March when Nvidia stock was at a significantly lower price than it is now. However, CEO stock sales don't necessarily indicate bearishness on the stock or even that it's time for profit-taking. Individual investors should remember that Huang is now one of the richest people in the world, with a company that's worth nearly $3 trillion. As of March 25, 2024, he owned 934,637,910 split-adjusted shares of Nvidia, which would be worth more than $100 billion at the stock's current price. In that light, selling even $10 million worth of Nvidia stock a day doesn't seem drastic. Even if Huang sold that much every trading day for a year, it would only put a small dent in his holdings, reducing them by roughly $2.6 billion. Considering that, it seems harder to see the sales as a significant bearish signal about the stock, as they only amount to a small percentage of his stake. Additionally, they're not enough to have an impact on Nvidia's trading volume, as the business is worth nearly $3 trillion, and more than 340 million shares, or roughly $40 billion worth, change hands on an average day. Rather than fixate on Jensen Huang's recent stock sales, investors are better off heeding his recent comments on the company, which show that demand for its products is still soaring. At the Goldman Sachs Communacopia conference last week, Huang was asked what he was worried about and said that Nvidia chips are in such high demand that it's "really emotional for people because it directly affects their revenues, it directly affects their competitiveness." In other words, demand is still significantly exceeding supply, and the company is working hard to rectify that. Nvidia expects to see revenue grow again in the third quarter, forecasting sequential revenue growth of 8%, though it typically beats its own estimates. Additionally, Nvidia's customers continue to tout their eagerness to invest in more AI infrastructure -- spending money on Nvidia components. If Huang was dumping all of his Nvidia stock, it would be deserving of scrutiny. However, in the current environment, selling a small percentage of his holdings seems meaningless. That doesn't mean that Nvidia stock will keep going up. The stock is likely to remain volatile, but Huang's stock sales aren't the sell signal that some investors might think they are.

Nvidia's CEO Has Sold Shares Virtually Every Trading Session Since Mid-June. Should Investors Follow Suit and Sell? | The Motley Fool

Since the middle of June, Nvidia (NVDA 3.83%) CEO Jensen Huang has been selling shares of his company's stock during basically every trading session. That leads to an obvious question: If the company's CEO is dumping shares, should you be selling your shares, too? Let's dive into Huang's trades and see whether this could be a signal -- or not -- to sell the stock. Huang is selling his Nvidia shares through what's known as a Rule 10b5-1 plan, which is designed to allow company insiders to sell shares without being accused of illegally trading on material non-public information. Through these plans, company insiders give brokers set parameters as to when the insider wants them to sell shares. This can be based on certain price triggers and/or dates and set up to sell a certain dollar amount or number of shares. Once established, the broker executes the plan following a designated cooling-off period. Insiders can make changes to the plan, but only during open insider trading windows and if they have no material non-public information that could impact the stock price. Huang's current 10b5-1 plan was established in March and revealed in a 10-Q filing in May. He arranged to sell 6 million shares (600,000 pre-split) by the end of March 2025. The parameters of Huang's plan are pretty straightforward, as he sells 120,000 Nvidia shares each trading day. His first trade was June 13, and it appears his plan is about to be wrapped up. Through his sales, Huang will have pocketed over $700 million in cash. Yes, that's a lot of shares sold and a lot of cash, but it's just a drop in the bucket for Huang, who owns over 860 million shares of Nvidia, even after this recent selling. Basically, he sold less than 1% of the shares he owned. Given the gains that Huang, who has been CEO at Nvidia since 1993, has seen, no one can blame him for selling some shares to gain liquidity. His wealth is still very much tied to Nvidia. The answer to this question comes down to each individual's circumstances. If you've seen huge gains in the stock over the past few years and Nvidia has become an outsized portion of your portfolio, it can be good portfolio risk management to lock in some gains. After all, every investment comes with risk, and Nvidia is no exception. At this point, the biggest risk the company faces is future demand. There are still questions as to whether demand for the company's graphic processing units (GPUs) will soon peak and eventually decline as the race for artificial intelligence (AI) infrastructure cools. This very well could come down to how much other companies start benefiting from AI in the areas of software and other industries, as the infrastructure players can't be the only AI winners or the spending will eventually stop. For now, though, there doesn't appear to be any let up for AI infrastructure spending. Cloud-computing operators are increasing their capital expenditure (capex) budgets, and companies such as Alphabet and Meta Platforms have indicated that there's more risk in under-investing in AI infrastructure and falling behind than in over-investing. At the same time, as AI models advance, they need exponentially more computing power, which comes from Nividua's GPUs. For example, xAI's Grok large language model (LLM) went from using 20,000 GPUs for its second iteration to needing 100,000 for its third iteration, while Alphabet's Llama 4 is projected to need 10x as many GPUs as Llama 3. Meanwhile, Oracle CEO Larry Ellison recently said there was no end in sight to the need for computing power for AI training when asked on the company's most recent earnings call if there would be a shift to less compute-intensive AI inference. While there's a risk that future demand could eventually dry up, the comments from Nvidia's customers indicate that this isn't going to happen anytime soon. Nvidia remains the best-positioned company in the AI infrastructure buildout. I think Nvidia's stock is attractively priced at a forward price-to-earnings ratio (P/E) of about 29x next year's analyst estimates, given the robust growth still ahead, based on customers' comments. As such, I'm not worried by Huang's recent selling and would consider buying the stock.