Wealthy figure Ray Dalio recently dispensed with his Nvidia shares. Should you mirror his action?
Every three months, investors get a glimpse into what big-league investment firms are doing with their funds. Once they surpass $100 million in assets, institutional investors like Ray Dalio and his company Bridgewater Associates are obliged to file a 13F report to the SEC. Released 45 days after the end of the quarter, these records divulge current investments.
During the third quarter of the year, Ray Dalio and Bridgewater Associates decided to offload around 1.8 million shares of Nvidia, worth approximately $212 million with the average price for that period.
Is it wise for other investors to mimic Dalio's actions and sell off a portion of their Nvidia shares? Or could there be other reasons behind their decision?
Nvidia's stock price skyrocketing over the past year
Bridgewater Associates' selling of Nvidia shares is not an isolated incident in the third quarter. In fact, the company's stance on Nvidia has been consistent throughout 2024. Bridgewater Associates had managed over 7 million shares of Nvidia at the end of 2023, gradually lowering their stake in the company each quarter. This pattern is common amongst hedge funds, as they simply seek to capitalize on their investments.
Individual investors can afford to maintain patience and hold onto successful companies without worrying about short-term fluctuations, due to the inherent risk tolerance associated with their portfolios. This strategy has enabled the "Foolish" style of investing to thrive, as investors can wait for companies to continue excelling without concern for daily market movements. However, fund managers face a different challenge; they are judged based on their quarterly results. Gains will not be realized until the stock is actually sold, making it difficult to seize opportunities when the market is on an upward trend.
Regardless, Nvidia remains one of Bridgewater Associates' top holdings, despite selling off a portion of their shares. In other words, the firm is merely adjusting their position size to account for the stock's remarkable performance.
Many investors should weigh this into their decisions, as Nvidia has been demonstrating exceptional growth over the past two years. Nvidia's stock growth may level off in the near future, and it might be beneficial to secure some of those gains, even if Nvidia continues to perform well.
Nvidia's performance still top-notch
While it's impossible to predict exactly when, Nvidia is bound to encounter some obstacles. Nvidia's graphics processing units (GPUs) are at the heart of the AI race, driving companies to buy in bulk to fuel their computing power. However, once companies have constructed the necessary infrastructure to accommodate their needs, Nvidia may face difficulties maintaining its momentum.
But this challenge is not imminent. In the third quarter (October 27 end), Nvidia reported a 94% year-over-year revenue growth to $35 billion. This impressive figure was further bolstered by a 111% increase in earnings per share. For the fourth quarter, Nvidia has projected revenue of $37.5 billion, representing an impressive 70% revenue growth rate.
Nvidia's continued success throughout 2025 is expected, with many of its key clients indicating plans to increase spending on data centers and AI modeling capabilities in the coming year.
However, Nvidia's stock is not exactly affordable, trading at 51 times its forward earnings. This high valuation indicates an optimistic outlook, which Nvidia has managed to uphold so far. As a result, despite recommending against selling off all Nvidia shares, it may be worthwhile to trim the position and secure some gains, especially if it has become an overbearing portion of your portfolio.
The decision by Bridgewater Associates to sell off a portion of their Nvidia shares, as revealed in their 13F report, is a financial strategy that institutional investors like them often employ to capitalize on their investments. With the sale bringing in approximately $212 million, this move demonstrates the significant financial impact of investing in companies like Nvidia.
Given Nvidia's impressive performance over the past year, it may be wise for some investors to consider following the footsteps of institutions like Bridgewater Associates and trim their Nvidia holdings. While Nvidia's stock growth is expected to continue, securing some of those gains could help mitigate potential risks associated with the stock's high valuation.
