Veteran Investor Paul Wick Reduces Nvidia Stake, Citing Earnings Growth Concerns

Renowned investor Paul Wick from Seligman Investments has recently trimmed his position in Nvidia Corp. (NASDAQ: NVDA), citing concerns over the company's future earnings growth, according to Bloomberg News. Wick, a seasoned technology investor with almost thirty years of experience, expressed a tempered enthusiasm during a video call at a UBS Group event in Singapore last Friday. However, he did not disclose the specific reduction in his stake. The veteran investor drew a parallel between Nvidia’s current scenario and the situation faced by Cisco Systems (NASDAQ: CSCO) during the dot-com bubble.

Wick highlighted that Nvidia's heavy reliance on its top 10 customers, who contribute between 60% to 70% of its revenue, positions it as a much riskier investment compared to giants like Microsoft or Google, both of which boast low customer concentration and an extensive client base. This week, Nvidia momentarily secured the title of the world’s most valuable company, driven by a significant tripling of its share value over the past year on the back of AI optimism. Despite this surge, Wick, alongside other investors like Rob Arnott from Research Affiliates, remains skeptical about the rally's long-term sustainability.

Nvidia currently trades at a multiple of 43 times its projected earnings for the next year, placing it among the highest in the Philadelphia Semiconductor Index, outpaced by just one peer. Wick, who oversees the $13.5 billion Columbia Seligman Technology & Information Fund, also commented on the returns on invested capital among generative AI companies that have funneled billions into Nvidia systems. He remarked that many of Nvidia’s major clients, such as Alphabet’s (NASDAQ: GOOGL) Google, Microsoft Corp (NASDAQ: MSFT), and Meta Platforms (NASDAQ: META), are actively developing their own processors.

Despite these concerns, Nvidia continues to be one of the primary holdings in Wick’s fund, which has outperformed 97% of its peers over the past three years, according to Bloomberg data. For now, traders should keep a close eye on Nvidia as the balance between its immense potential and inherent risks continues to evolve.