Why high-profile investors are dumping NVIDIA shares
What's the story
Top investors like Michael Burry, Masayoshi Son, and Peter Thiel are dumping their NVIDIA shares. The move comes as fears of an overhyped artificial intelligence (AI) rally grow louder. NVIDIA has been at the forefront of this AI-driven surge in the US market. However, these high-profile investors are now reassessing their positions in light of rising concerns about the sustainability of this trend.
Investor moves
SoftBank has sold NVIDIA shares worth $5.8B
Thiel, a prominent Silicon Valley figure, has sold his stake in NVIDIA. Son's SoftBank Group has completely exited its NVIDIA investment, selling shares worth about $5.8 billion. Meanwhile, Burry has been shorting the chipmaker with put options tied to NVIDIA shares worth about $187 million. These moves indicate a growing trend among high-profile investors to distance themselves from NVIDIA amid concerns about an overheated AI market.
Market concerns
Concerns over AI market valuations and investments
The spike in demand for tech stocks has led to inflated valuations for AI stocks. Further, ongoing investments to bolster AI capabilities and build data centers have added to these concerns. Eric Sheridan, a US Internet Equity Research Analyst at Goldman Sachs, noted that private market valuations for AI companies are well above public market valuations. He said private companies are mainly being valued on revenue growth with less emphasis on profits and margins.
Investment impact
AI investments and S&P 500 valuations
The strength of this narrative-led boom has pushed S&P 500 valuations to elevated levels, making it one of the world's most expensive equity markets. The four major hyperscalers—Meta, Alphabet, Amazon, and Microsoft—are projected to spend $360-370 billion in capex this year. This surge in capex is also distorting macro data. Harvard economist Jason Furman said US GDP growth in H1 2025 was almost entirely driven by data center and AI investment; without it, growth would have been just 0.1% annualized.
Market caution
Wall Street leaders caution against high valuations
The tone of caution has been echoed by Wall Street leaders. Goldman Sachs CEO David Solomon warned equities could face a 10-20% correction in the next one to two years due to high valuations and earnings that can't keep up. Morgan Stanley CEO Ted Pick echoed similar concerns, adding to the market's already fragile sentiment.