Major Investors Massively Sell Nvidia: Is an AI Correction Coming?

On Wall Street, the S&P 500 slipped for the fourth consecutive day on Tuesday morning. Other major indices also fell: the Dow Jones dropped by 1.07 percent, the S&P 500 by 0.83 percent, and the Nasdaq by 1.21 percent. The key pressure once again came from the tech sector, where investors are increasingly assessing that stock prices, after two years of AI euphoria, have simply gone too far.

Nvidia, Microsoft and Amazon each fell between three and four percent yesterday. The nervousness is heightened as Nvidia, the global star of artificial intelligence and the largest company in the world by market capitalization, is set to release a new quarterly report this evening Central European Time, which could significantly impact the entire sector. Nvidia is a true giant in the world of computer chips, having reached a market value of over a trillion dollars from relative obscurity in just three years, and with the results announcement, the world will find out whether we are on the brink of an AI bubble burst or if the hype continues.

Eight Percent of the S&P 500

In just three years, Nvidia has become the first company in history to reach a value of five trillion dollars (now back around 4.5 trillion). One single company holds eight percent of the total value of the S&P 500. Its net income between 2023 and 2024 increased by more than 580 percent, and analysts have treated it as a company that ‘exceeds impossible expectations’ quarter after quarter. Indeed, Nvidia’s sophisticated chips are key to building artificial intelligence models like OpenAI’s ChatGPT or Anthropic’s Claude. This raises the question for investors: if Nvidia is truly that strong, why are the largest investors selling its shares? Why are three capital investors, who have almost nothing in common, now doing the same thing, selling shares of the largest global star?

Complete Exit

Regulatory data released on Monday revealed that the hedge fund of American billionaire Peter Thiel sold its entire stake in Nvidia. Thiel Macro LLC sold all of its 537,742 shares of the chip manufacturer, which were valued at around 85 million dollars at the end of the second quarter, and although the sale was executed during the third quarter, it was announced just three days before Nvidia’s report. Those shares would have been worth about 100 million dollars at market close on September 30, so it is unclear exactly when Thiel’s fund sold its stake. This has further increased investor nervousness, who are already trying to assess when and if they will ever see a return on their investments in AI infrastructure.

More Important Other AI Investments

All of this happened shortly after SoftBank revealed that it sold all its shares in Nvidia in the same quarter. Thiel Macro’s stake was relatively small compared to Nvidia’s market capitalization of 4.6 trillion dollars and the 5.8 billion dollar stake held by Japanese SoftBank. The Japanese conglomerate SoftBank is selling all its shares in Nvidia, even though it continues to invest aggressively in AI, including an investment of around 23 billion dollars in OpenAI. The justification for the sale was that they needed to ‘unlock capital’, meaning to take profits specifically on Nvidia. SoftBank’s Masayoshi Son, who leads the loudest AI optimism in the world, is formally not ‘against’ Nvidia. However, the fact that they are exiting right after a historic peak raises eyebrows.

Burry’s Bet

Earlier this month, Michael Burry, the investor from the film The Big Short who predicted the collapse of the real estate market in 2008, revealed that his hedge fund purchased put options worth 9.2 million dollars against Nvidia and Palantir, meaning he is directly betting on the decline of their stocks. This put option instrument gives the investor the right to sell a stock at a predetermined price in the future, even higher than the market price. In other words, it takes a position if the market goes downhill. Burry believes that large tech companies underestimate the depreciation of expensive AI equipment and that they could soon be left with large amounts of obsolete infrastructure, which would significantly impact their future profits.

Along with these three prominent investors, Nvidia insiders are also selling in unusually large quantities. Jensen Huang, founder and CEO, sold several large blocks of shares (including 225,000 shares and another series at around 208 USD). Mark A. Stevens, a director, sold 350,000 shares. Harvey C. Jones, a director, sold 250,000 shares. Insiders have collectively sold more than 220 million dollars worth of shares in the last three months.

Of course, sales are not necessarily a sign of doom; they are often part of planned 10b5-1 schemes (SEC Rule 10b5-1 trading plan represents a pre-planned program for selling or buying shares used by directors and executives of companies to legally trade their own shares without the risk of insider trading accusations). However, when shares of a company are simultaneously sold by Thiel, SoftBank, and Burry goes short, and the market is already tense, the timing becomes news in itself.

What is Changing in the Market?

The motives of individuals vary, but the fact is that the sales are happening in the same quarter in which Nvidia reached a five trillion dollar market value. While some sold out of financial necessity (SoftBank), others from philosophical or strategic beliefs (Thiel), and others from the belief that the AI sector is overheated (Burry), the market reads all these moves as part of the same pattern. Analysts interpret it this way, ‘it’s not all coincidence’, and their theories do not help calm a market that is increasingly questioning whether Nvidia’s valuation, as well as that of the entire AI sector, is sustainable.