Nvidia's (NVDA 0.25%) co-founder and CEO Jensen Huang has been selling shares of his company's stock lately. Filings with the Securities and Exchange Commission (SEC) showed that he sold 59,376 shares across daily trading sessions on Sept. 12 and 13. All told, the executive's company stock sales on those days totaled up to $26.9 million.
Notably, it wasn't the first time that Huang unloaded Nvidia shares this month. Last week, the CEO sold roughly $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 its chief executive's recent moves could raise red flags in the eyes of some investors.
After Nvidia's stock soared 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 might worry about Huang's move
Investors understandably get skittish when they see that a company's CEO is unloading shares. Rightly or wrongly, it's often interpreted as a lack of confidence in future performance. And more so than any other company in the world, Nvidia is under the microscope right now.
Investors are wondering whether AI stocks are in a bubble or still in the very early stages of a much more substantial long-term bull run. It's not surprising that the processing leader has become a battleground stock. Performance expectations are sky-high.
Nvidia published its second-quarter report roughly three weeks ago and delivered virtually unprecedented sales and earnings beats. While the average Wall Street analyst target guided for earnings per share of $2.09 on sales of $11.22 billion, the AI leader blew the doors off those targets and posted per-share earnings of $2.70 on sales of $13.51 billion.
Making the historical quarterly beat even better, the company guided for revenue of approximately $16 billion in the current quarterly period. This far eclipsed the average analyst estimate's forecast 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.
With lingering concerns about inflation and interest rates, fears of a potential recession somewhere on the horizon, and rising bond yields, there are a variety of macroeconomic factors that could weigh on Nvidia's stock performance in the near term. Adding another layer of bearish complexity, tensions remain high between the U.S. and China.
Given all of those dynamics, it might be tempting to interpret Huang's recent stock sales as yet another bearish signal. But the CEO's moves hardly look concerning when placed in context.
Don't sweat the small stuff
While Huang's stock sales might seem alarming at first glance, 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 probably shouldn't be concerned 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 company stock -- giving him a 3.5% ownership stake in the company and making him the largest individual shareholder.
For comparison, Vanguard, BlackRock, and Fidelity Investments owned 8.3%, 7.3%, and 5.6% of the company's shares, respectively. These are massive investment companies that manage trillions of dollars in assets, while Huang is a single shareholder.
Huang's recent combined stock sales don't even come close to approaching 1% of his total holdings in the company. Additionally, because the stock sold was originated through options granted as part of his executive compensation plan, his total shares owned didn't decrease.
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 remains heavily invested in the business. He still has plenty of skin in the game, and his heavy insider ownership position should continue to incentivize him to pursue actions and strategies that work to the benefit of the broader shareholder base.
There are many reasons why a CEO might sell company shares. Insider selling is worth monitoring, but Nvidia shareholders should keep their eyes on the big picture and avoid reading too much into what amounts to a relatively small move from Huang.
