Nvidiaof (NVDA -3.69%) Co-founder and CEO Jensen Huang has recently been selling shares in his company. A filing with the Securities and Exchange Commission (SEC) showed that it sold 59,376 shares during the intraday trading sessions on September 12 and 13. All told, the executive’s total sales of company stock that day amounted to $26.9 million.
Notably, this was not the first time Huang unloaded Nvidia shares this month. Last week, the CEO sold approximately $42 million worth of stock after exercising options on the shares. The graphics processing unit (GPU) leader is undoubtedly at the forefront of the artificial intelligence (AI) revolution, but recent moves by its CEO may raise red flags in the eyes of some investors.
After Nvidia’s stock is up roughly 213% year to date, are Huang’s recent moves a sign that Nvidia is in danger of running out of steam?
Why some investors may worry about Huang’s move
Seeing a company’s CEO unloading shares gives investors insight. Rightly or wrongly, this is interpreted as a lack of confidence in future performance. And more than any other company in the world, Nvidia is under the microscope right now.
Investors are wondering if AI stocks are in a bubble or still in the early stages of a long-term bull run. It’s no surprise that the processing leader has become a battlefield stock. Performance expectations have skyrocketed.
Nvidia published its second-quarter report roughly three weeks ago and delivered a virtually unprecedented sales and earnings beat. While the average Wall Street analyst guided for earnings of $2.09 per share on sales of $11.22 billion, the AI ​​leader missed that target and posted earnings of $2.70 per share on sales of $13.51 billion.
Bettering its historic quarterly beat, the company guided for revenue of approximately $16 billion during the current quarter. That eclipsed the average analyst estimate for sales of $12.61 billion.
Yet despite the incredible performance, Nvidia’s stock is now down more than 3% since its Q2 earnings release.
NVDA data via YCharts
With lingering concerns about inflation and interest rates, fears of a possible recession somewhere on the horizon, and rising bond yields, there are a variety of macroeconomic factors weighing on Nvidia’s stock performance in the near term. Adding another layer of complexity to the recession, tensions remain between the US and China.
Given all these dynamics, it might be tempting to interpret Huang’s recent stock selloff as another bearish signal. But when the CEO’s moves are put into context, little attention is paid to them.
Don’t sweat the small stuff
Huang’s stock sales may seem alarming at first glance, but it’s important to put them in context. Nvidia’s most recent DEF-14A filings, which break down insider and institutional ownership stock holdings, help show why the average shareholder shouldn’t worry about the CEO’s latest moves.
Nvidia’s last comprehensive stock ownership document was filed with the SEC on May 8 and reflected holdings on April 3. As of the second date, Huang owned 86,878,193 shares of the company’s stock — giving him a 3.5% ownership stake in the company and making him the company’s largest individual shareholder.
For comparison, Vanguard, black stone, and Fidelity Investments own 8.3%, 7.3% and 5.6% of the company’s shares, respectively. These are large investment firms that manage trillions of dollars in assets, while Huang is the sole shareholder.
Huang’s recent cumulative stock sales do not even come close to 1% of his total holdings in the company. Additionally, because the stock sold originated through options granted as part of his executive compensation plan, his total shares owned were not diluted.
In short, Huang’s recent stock sales amount to little more than a blip on the radar. Even after selling shares this month, Nvidia’s CEO continues to invest heavily in the business. He still has plenty of skin in the game, and his heavy insider ownership position should encourage him to pursue actions and strategies that work to benefit a broader shareholder base.
There are many reasons for a CEO to sell company shares. Insider selling is worth keeping an eye on, but Nvidia shareholders should keep their eyes on the bigger picture and avoid reading too much into the magnitude of Huang’s relatively small moves.