Trillions of market value evaporated! Huang Renxun cashed out 570 million in 5 days, has NVIDIA (NVDA.US) been overhyped?

On Friday this week, NVIDIA fell by 5% after the opening of the US stock market. By the close, NVIDIA had dropped by 3.22%, with a stock price of $126.57 per share and a market capitalization of $3.11 trillion. Compared to the market peak of $3.34 trillion on June 18th, after the two-day decline on June 20th and June 21st, NVIDIA's market value has evaporated by approximately $220 billion (about 1.6 trillion RMB). Alongside NVIDIA's market value evaporating by hundreds of billions of dollars, the company's CEO, Huang Renxun, cashed out $79 million in stocks (about 5.7 billion RMB).

According to the information obtained by Zhitong Finance, documents submitted by NVIDIA to the US Securities and Exchange Commission on June 20th showed that NVIDIA CEO Huang Renxun applied to sell 120,000 shares of NVIDIA stock, worth $16.3 million. Prior to this, Huang Renxun had sold 120,000 shares of company stock on June 18th, June 17th, June 14th, and June 13th, corresponding to a total market value of approximately $63.08 million for these four days. Starting from June 13th, Huang Renxun has sold a total of 600,000 shares of company stock over five trading days, with a value of nearly $79 million.

In addition, according to statistics compiled by Washington Service, NVIDIA executives and board members have sold approximately 770,000 shares of NVIDIA stock worth over $700 million so far this year, not including the impact of the stock split on June 10th at a 1:10 ratio. According to the latest data from Washington Service, this is the largest scale of selling since the first half of 2023, based on a semi-annual basis, when about 848,000 shares were sold. Moreover, although there have been many insiders selling, there has been a lack of internal buying pressure. According to statistics compiled by Washington Service, apart from exercising significant options, NVIDIA has not had any insiders buying shares since Chief Financial Officer Colette Kress bought a large amount of stock in December 2020.

In addition, there have been recent reports that at the end of last year, Huang Renxun and executives held a series of meetings to discuss an increasingly worrying issue: whether NVIDIA's largest customer will exhaust the data center space to install NVIDIA chips, which may affect NVIDIA's sales. Huang Renxun does not want the company to eventually decline like former hardware giants such as Cisco, so he is pushing the company to enter the software and cloud services field to compete with its largest customer. Market rumors also suggest that NVIDIA's competitor, AI chip startup Cerebras, has secretly submitted IPO documents to regulatory authorities.

Renaissance Macro Research analyst Kevin Dempter pointed out that in early March this year, NVIDIA's stock price also experienced a similar trend, briefly falling by 20%. He believes that a similar 20% pullback would bring NVIDIA's trading price back to around $110 at the beginning of this month.

Those who are not completely optimistic about NVIDIA's stock price include Seligman Investments fund manager Paul Wick. He has been reducing his holdings of NVIDIA stock in recent weeks. Paul Wick pointed out that 60% to 70% of NVIDIA's revenue comes from its top 10 customers, making NVIDIA inherently much riskier than Microsoft or Google.

Paul Wick believes that NVIDIA derives about 60% to 70% of its revenue from its top 10 customers, making it "essentially a riskier company than Microsoft or Google, whose customer concentration is very low, numbering in the thousands."

"Stock King" Decline, Is the U.S. Stock Market Overheated?

As NVIDIA executives and directors have been heavily selling off, U.S. tech stocks closely related to artificial intelligence also show signs of overheating. As the most important stock in the U.S. stock market, with NVIDIA's recent sharp decline over the past two days, the U.S. stock market has fallen back after rebounding to historic highs, showing signs of buyer fatigue, prompting calls for a recent pullback. The ambitious tech stocks that have been driving this bull market are under pressure, with the Nasdaq 100 index falling on Thursday after rising for 7 consecutive days, and further declining on Friday. The S&P 500 index briefly surpassed 5500 points during Thursday's session, exceeding the technical threshold that usually indicates market overexpansion. The index closed lower on both Thursday and Friday.

On Friday, U.S. investment bank Stifel, Nicolaus & Co. stated that if past market exuberance can be used as a reference, the S&P 500 index could rise by nearly 10% this year. However, the company's chief equity strategist Barry Bannister said that just like previous "bubbles," this bubble will eventually burst. **Bannister stated that with investors continuing to pour in, the U.S. stock indices could reach the 6000-point milestone by the end of 2024, while the point level on Friday was around 5465 However, he expects that by mid-2026, the index will fall back to the level at the beginning of this year, around 4800 points, with a market value evaporating by one-fifth.

It should be noted that this forecaster stated that risk assets, especially the stock market, will experience a correction earlier. He targets the year-end goal for the S&P 500 index at 4750 points, which implies a drop of about 13% from today. Due to pressure on tech stocks, the index retreated after hitting a historical high on Thursday. However, he mentioned that investors' optimism has been driving the market for months, and this sentiment will boost the stock market before the final crash.

Bannister and his team wrote in a report to clients on Wednesday: "Timing is everything, and we recognize that investors may be in a full-blown bubble/frenzy mode that seems to exceed our concerns."

The U.S. stock market has recently extended its bull market rally, with investors expecting signs of cooling inflation to lead to a rate cut by the Federal Reserve this year. This view, coupled with strong earnings and enthusiasm for AI-related companies, has propelled the S&P 500 index to rise by nearly 15% this year.

However, some on Wall Street warn that the market is overbought, with power too concentrated, making the stock market fragile. Bloomberg's tracked strategists have an average year-end target of around 5297 points, with the highest upper limit given by Evercore ISI at 6000 points, and the lowest forecast by Morgan Stanley at 4200 points