This Big Nvidia Investor Just Closed Its Entire Position. Should You Worry?

Nvidia (NASDAQ:NVDA) stands as a powerhouse in the semiconductor industry, specializing in graphics processing units (GPUs) that power everything from gaming to artificial intelligence. Back in 2017, SoftBank Group emerged as one of its major investors, amassing a $4 billion stake that made it the fourth-largest shareholder at the time. This investment highlighted SoftBank’s early bet on Nvidia’s potential in emerging tech.

However, SoftBank has steadily reduced its holdings over the years. Recently, the firm disclosed it sold off its entire remaining stake in the AI chipmaker for $5.83 billion. This move has investors questioning Nvidia’s future trajectory and whether they should be worried.

A Missed Opportunity

At the recent AI Summit in Tokyo, Nvidia CEO Jensen Huang shared the stage with SoftBank founder Masayoshi Son, turning the spotlight on their shared history. Huang joked about Son’s decision to sell SoftBank’s Nvidia stake in 2019, just before the company’s explosive growth driven by AI demand. SoftBank had invested around $700 million for a 4.9% stake, selling it for $3.3 billion — a solid profit at the time. But Huang pointed out that those shares would now be worth over $150 billion, given Nvidia’s market surge.

The exchange was lighthearted but poignant. Huang quipped, “We can cry together,” as he hugged Son on stage. Son described the 2019 sale as “tearful,” admitting the regret over missing Nvidia’s AI-fueled rise. Huang even recalled how Son once offered to back a full buyout of Nvidia, calling it a “great idea” in hindsight. This banter underscores Nvidia’s transformation from a graphics chip specialist to the AI era’s linchpin, with its GPUs essential for training large language models and data centers.

The timing of Huang’s remarks adds irony. The summit focused on AI advancements, where Nvidia’s Blackwell platform and other innovations stole the show. Son, known for bold tech bets through SoftBank’s Vision Fund, has pivoted heavily toward AI startups. Yet, his past exit from Nvidia serves as a cautionary tale about timing in high-growth sectors.

SoftBank Dumps Remaining Stake for New Bets

Not long after the summit, SoftBank revealed it had liquidated its last 32.1 million Nvidia shares in October, fetching $5.83 billion. This complete exit follows the 2019 sell-off, marking the end of a once-significant partnership. SoftBank’s Vision Fund was an early Nvidia backer, building that $4 billion position in 2017 amid rising interest in AI and autonomous driving tech.

The proceeds are earmarked for major investments, including a $22.5 billion commitment to OpenAI (OPAI.PVT), alongside deals like acquiring ABB‘s robotics unit. SoftBank needs around $30.5 billion for its October-December quarter plans, which also cover $6.5 billion for Ampere Computing. This shift signals SoftBank’s strategy to monetize assets for fresh opportunities in the AI ecosystem.

SoftBank Downplays the Move

SoftBank executives have been quick to clarify the rationale. CFO Yoshimitsu Goto emphasized that the sale enables new investments while bolstering financial stability. A source close to the decision stressed it has “nothing to do with concerns about AI valuations.” Analysts echo this: Morningstar‘s Dan Baker was quoted by CNBC saying SoftBank explicitly stated it’s not a negative view on Nvidia, as funds flow to other AI plays. New Street Research‘s Rolf Bulk added context on the capital needs for OpenAI and beyond.

In essence, SoftBank insists the decision is portfolio management, not a signal of doubt in Nvidia’s prospects. Investors shouldn’t read alarm into it, as SoftBank remains tied to AI ventures that often rely on Nvidia’s tech, like the $500 billion Stargate data center project.

Key Takeaways

SoftBank’s full exit from Nvidia shouldn’t sway your investment stance. If anything, the investment bank might be repeating the 2019 mistake — selling too soon amid AI’s boom. Nvidia dominates the GPU market, with its chips central to AI training and inference. Recent strides, like the Blackwell architecture, position it for sustained growth.

As AI adoption accelerates across industries, Nvidia’s valuation could keep climbing. A $10 trillion valuation is not out of the question. Investors should focus on a business’s fundamentals: strong demand, innovation pipeline, and market leadership, and not try to walk lockstep with any investing guru whether it is SoftBank or Warren Buffett.

SoftBank’s pivot to OpenAI highlights AI’s vast potential, indirectly validating Nvidia’s role. In a volatile market, such moves are routine and Nvidia’s future trajectory looks solid.