7 months ago
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Nvidia (NASDAQ: NVDA) stock sent investors on a wild ride so far in 2024. It was trading at a stock split-adjusted price of around $48 at the start of the year. The price got as high as $140.76 at one point in mid-June, then plunged to $99 by early August before recovering enough to trade around $130 a share by mid-August. It then fell 21% over a few weeks to trade around $103 in early September before recovering somewhat this past week, and it now trades around $118.
Whew. A wild ride indeed.
It's somewhat understandable, of course. As the focal point of the artificial intelligence (AI) boom, Nvidia carries a lot on its shoulders, and expectations are sky-high for this tech stock. Even after beating consensus estimates in its last earnings report, the stock price still slipped. Apparently, Wall Street felt it didn't beat their estimates by enough. While the stock's price trajectory is currently on the upswing, investors are hyper-tuned to its performance and any indication of where it may be headed.
It might interest investors, then, that Nvidia's CEO, Jensen Huang, has been selling some of his Nvidia holdings. In the last month alone, Huang sold 720,000 shares totaling about $78 million.
What does it mean that Nvidia's chief is offloading shares?
This latest sale isn't his first cashing in on shares. Since just the start of July, Huang has sold over 4 million shares worth roughly $500 million. At first glance, this might be seen as a sign that the person who knows the business the most intimately thinks the stock price is going to drop (or that there's trouble ahead). But a more thorough analysis shows it's not. Although I can't know Huang's exact thinking, there's no reason to take these sales as a cause for worry.
The simpler explanation comes down to the cost of living. The vast majority of Huang's net worth is tied up in Nvidia stock. Unfortunately, you can't buy a hamburger (or a super yacht) with stock -- at least not easily. Cash is king, as they say. It is far more likely that Huang is simply liquifying a tiny portion of his massive net worth -- valued at around $100 billion today -- to have some cash on hand.
The Securities and Exchange Commission (SEC) has rules around executives buying and selling their own company's stock. To avoid any suspicion of insider trading (as well as tamp down potential transaction-related public panic), SEC rule 10b5-1 allows executives to release public plans that outline predetermined, automated stock transactions handled by a neutral entity. While it may look like Huang just sold this stock, he actually decided to do so months ago and did it in a way that suggests he had very little influence on the price.
