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✅ Main takeaway:
Key takeaways
- Thiel Marco, the hedge fund run by PayPal and Palantir founder Peter Thiel, sold its entire stake in Nvidia last quarter, joining the list of investors who cashed out of the AI darling in recent months.
- AI sentiment has deteriorated in recent weeks amid discussions about rising stock valuations, unconventional deals between suppliers and customers, and doubts about the return on AI investments.
While everyone is watching Nvidia’s earnings report tomorrow, a few big investors have already taken their chips off the table.
Thiel Macro, the hedge fund of tech giant Peter Thiel, revealed in a regulatory filing late last week that it sold its entire stake in the leading artificial intelligence company during the third quarter. The 537,742 shares the company held before the start of this quarter were worth about $100 million at the end of September.
While people may sell assets for all sorts of reasons, Thiel joins a growing list of big hitters whose moves in Nvidia (NVDA) have recently raised eyebrows on Wall Street. Japanese investment firm SoftBank revealed last week that it sold its entire stake in Nvidia in October, raising about $5.8 billion. (Executives said the center was liquidated to fund investments in another AI darling, OpenAI.)
Why is this important?
Nvidia, which dominates the market for accelerated computing chips, has benefited more significantly from the boom in investment in artificial intelligence than almost any other American company. The increasingly bearish outlook for its shares could spell trouble for more speculative AI bets. Some investors don’t wait for the next earnings report to make this decision.
Others have bet outright against Nvidia. Scion Asset Management, run by Michael Burry, manager of famed hedge fund The Big Short, revealed earlier this month that it shorted $186 million worth of Nvidia shares in the third quarter. (Sion also had a short bet against Palantir (PLTR), the data analytics company Thiel founded in 2003, which was valued at more than $900 million at the end of the quarter.
Some on Wall Street are increasingly concerned that the AI boom is actually an AI bubble. They point to rising stock valuations, uncertainty about AI’s revenue potential, and a series of circular deals between vendors and customers as reasons for concern. AI optimists stress that valuations are modest compared to the dot-com bubble, to which the current investment cycle is often compared, and remind skeptics that investment in AI is led by hugely profitable technology companies.
The bubble controversy has weighed on AI sentiment and stocks heading into one of Wall Street’s most recurring events: Nvidia’s quarterly earnings report, due Wednesday afternoon.
High-flying AI stocks like Palantir, Applovin (APP) and Super Micro Computer (SMCI) are among the worst-performing stocks in the S&P 500 over the past week. Shares of Nvidia and Microsoft ( MSFT ) fell on Tuesday even after they announced a cloud computing deal with startup Anthropic, the kind of tie-up that months ago would have been sure to boost socks.
Nvidia shares have fallen more than 10% since late October, when it became the first company in history to reach $5 trillion. However, Wall Street expectations remain high ahead of Wednesday’s report, with analysts predicting that strong investments in Big Tech will lead to a strong quarter for the chipmaker.
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