From steadfast holding to decisive liquidation! NVIDIA "iron fan" fund managers warn of multiple risks
Hedge fund founder Jonah Cheng has sold all of his NVIDIA shares, citing reasons including inventory risk, lack of upward revisions in earnings expectations, competition from self-developed chips, and a slowdown in cloud computing spending. He once viewed NVIDIA as a successful investment but has expressed doubts about its prospects. Despite NVIDIA's stock price soaring over 1400% in the past five years, analysts are beginning to voice skepticism, with Seaport Global Securities assigning a "Sell" rating to the stock
According to the Zhitong Finance APP, hedge fund founder Jonah Cheng stated that NVIDIA (NVDA.US) is the most successful investment of his career. However, he has now sold his last batch of NVIDIA shares and expressed doubts about the prospects of this $3.5 trillion chip giant. The fund Captain Global Fund, founded by the former UBS analyst, focuses on the technology sector and achieved a return of 42% last year. The fund is one of the many beneficiaries of NVIDIA's soaring stock price over the past decade. When Jonah Cheng established the fund in 2016, NVIDIA was one of the first stocks he bought, and he has made multiple additional investments since then.
In the first quarter of this year, Jonah Cheng sold all his NVIDIA shares due to concerns about delays in the delivery of its GB200 server racks. He pointed out issues such as inventory risk, lack of upward revisions in earnings expectations, competition from self-developed chips, and a slowdown in spending by cloud computing companies as reasons for his decision to avoid the stock. He stated, "I really like NVIDIA; this stock has made me the most money in my life. But when I need to sell, I have to sell. You can't fall in love with a stock."
Over the past five years, NVIDIA's stock price has soared more than 1400%. Although it remains widely favored by analysts, some doubts are beginning to emerge. Seaport Global Securities unusually gave the stock a "sell" rating on April 30, citing a potential slowdown in AI budgets by 2026. Michael Burry, who gained fame for "shorting the U.S. real estate market," also bought a large number of put options on NVIDIA earlier this year, although that may just be a hedging operation.
However, NVIDIA remains a stock that is difficult to short. Despite a temporary drop influenced by the progress of China's DeepSeek artificial intelligence technology in the first quarter, the stock price has fully rebounded. As of last Friday's close, it has risen about 6% year-to-date. Signs of easing tensions between the U.S. and China have also helped alleviate a major challenge faced by global chip manufacturers.
Jonah Cheng was a prominent chip industry analyst at UBS. After transitioning to a hedge fund manager, he stated that he has not completely turned into a long-term bear on NVIDIA. He mentioned that if the company raises its earnings expectations, he would still consider buying NVIDIA shares again, adding that he is not currently shorting the stock.
Jonah Cheng also sold his holdings in Taiwan Semiconductor Manufacturing Company (TSM.US) by the end of 2024. The reasons for selling the world's largest contract chip manufacturer include geopolitical risks and uncertainties regarding future spending plans of cloud service providers.
Currently, he prefers to invest in small and medium-sized companies that provide components for tech giants. Some of his favored stocks include AI server manufacturer Celestica (CLS.US) and Wiwynn Corp., cooling product manufacturer Asia Vital Components Co., and cable manufacturer Credo Technology Group Holding Ltd
