Since mid-June, Nvidia CEO Jensen Huang has consistently sold shares of the company’s stock almost every trading session, prompting a question about whether investors should follow suit.
Huang’s sales are conducted through a Rule 10b5-1 plan, which allows company insiders to sell shares without facing accusations of illegal trading on material non-public information. Under these plans, insiders instruct brokers on when to sell shares based on specific price triggers, dates, or pre-set amounts. Changes to these plans can only be made during open trading windows and without possessing any material non-public information.
Huang’s current 10b5-1 plan, established in March and disclosed in a 10-Q filing in May, involves selling 6 million shares (600,000 pre-split) by the end of March 2025. The arrangement is straightforward: Huang sells 120,000 Nvidia shares each trading day. Since initiating the first trade on June 13, he is close to completing these sales, amassing over $700 million in cash. Despite this significant sum, the sales represent less than 1% of Huang’s ownership in Nvidia, given his remaining 860 million shares.
Huang, Nvidia’s CEO since 1993, has seen substantial gains, making his decision to sell some shares for liquidity understandable, as his wealth remains predominantly linked to Nvidia.
Investors considering whether to sell Nvidia shares should weigh their individual circumstances. Significant gains from the stock could merit some profit-taking to manage portfolio risk. Nvidia faces risks, particularly around future demand for its GPUs, amid evolving AI infrastructure needs.
Current trends indicate robust AI infrastructure spending, with cloud-computing operators increasing capital expenditure budgets. Companies like Alphabet and Meta Platforms recognize the risk of under-investing in AI infrastructure. Evolving AI models further drive the demand for computing power, exemplified by xAI’s Grok and Alphabet’s Llama iterations requiring exponentially more GPUs.
Despite potential future demand risks, comments from Nvidia’s customers suggest no immediate decline. Nvidia appears well-positioned within the AI infrastructure sector.
Valued at a forward price-to-earnings ratio of about 29 times next year’s analyst estimates, Nvidia’s stock is considered attractively priced, reflected by anticipated growth. Consequently, Huang’s recent sales are not a significant concern, and holding or buying the stock may remain a viable option.
