Looking at the decline of artificial intelligence? Rothschild Family's "Reduction" of NVIDIA Analysts | AI | Family

China Fund News Amman

Just as the world was going crazy about AI, the century old European financial giant Rothschild family quietly reduced their holdings.

According to a Bloomberg report on June 2nd, Benjamin Melman, Global Chief Investment Officer of Edmond de Rothschild, an asset management firm, revealed that the company has been oversupplying Nvidia since the end of 2020, but has since partially taken profits and currently holds a much smaller position.

It is understood that this asset management institution, headquartered in Geneva, Switzerland, is owned by the Rothschild family, a long-standing European financial family with over 200 years of history. Currently, it manages assets worth 79 billion Swiss francs.

Hold for 8 years to "step on the right" rhythm to increase or decrease the holding

According to the holdings of Edmond de Rothschild compiled by Fintel, this veteran asset management firm increased its holdings in Nvidia during its first performance boom in 2015. At that time, the number of holdings reached over 1.6 million shares.

However, despite Nvidia's explosive performance, its stock price has not risen much. This asset management institution also had to correct its mistake by reducing its holdings in the slow rise of Nvidia's stock price, and finally reduced its holdings to less than 10000 shares in the first quarter of 2018. However, at this time, Nvidia's stock price also rose from around $4 in 2015 to around $60, estimated to have increased by 15 times.

After 2018, the rise and fall of virtual currency has made Nvidia's stock price like a roller coaster. At the end of 2021, the collapse of virtual currency caused Nvidia's stock price to plummet.

During this period, Edmond de Rothschild seemed to have "stepped on" the rhythm every time to increase and decrease positions.

Data shows that Edmond de Rothschild's second major increase in holdings occurred in the second quarter of 2022. Although Nvidia's stock price continued to experience three waves of decline thereafter, Edmond de Rothschild continued to increase his holdings and by the end of 2022, he had increased his holdings by over 200000 shares.

Since the outbreak of the AI concept this year, Nvidia, as a representative of underlying computing power, has seen its stock price rise by over 100% and hit a new high of $419.38 on May 30th, with a total market value exceeding $1 trillion, almost becoming the ninth listed company in the world with a market value exceeding $1 trillion.

Valuation Godfather Clearing

Like Edmond de Rothschild, Asworth Damodaran, a renowned contemporary investment valuation expert known as the "Godfather of Valuation," also chose to cash out at high positions.

According to Barron Weekly, Damodaran has been investing in Nvidia since 2017 and has now sold its stock.

Damodaran said on May 30th, "Until this morning, Nvidia was still in my portfolio, and I finally removed it from my portfolio because I couldn't bear such an increase. Within a week, the market value increased by $300 billion, which is challenging the absolute limit of sustainable value."

Damodalan estimates that Nvidia currently holds 80% of the $25 billion artificial intelligence chip market, and the most optimistic prediction is that the market size will reach $350 billion in 10 years. Even assuming Nvidia's future market share reaches 100%, Damodalan's valuation would still be 20% lower than its recent stock price. "I like Nvidia, but as an investment, I can't get a valuation of over $400 per share," he said

In addition, NVIDIA EVP and CFO Kress Colette continued to sell their equity in the company on May 30, 2023 US time.

Kress Colette sold a total of 6124 shares of NVIDIA equity, with an average reduction price of $400.254 to $417.79, resulting in a total cash out of approximately $2.49 million.

Wall Street got into a fight

Some people believe that AI valuation is too high and they have reduced their holdings, while others believe that Nvidia's stock price is still low at the current stage.

Among the 49 analysts surveyed by FactSet, 41 gave Nvidia a buy rating, an increase of about one-third from the 30 people who gave this rating in October last year. These analysts gave Nvidia a median stock price of approximately $450. As of publication, Nvidia's stock price closed at $393.27.

Stacy Rasgon, an analyst at Bernstein, an investment research firm in New York, said in an interview with CNBC that Wall Street has recently raised Nvidia's target stock price due to previously estimated low profit expectations. At present, investors still have different voices. For example, Cathy Wood, CEO of Ark Investment, and others said that Nvidia is overvalued and has entered the foam stage.

Michael Hartnett, the most accurate analyst on Wall Street and strategist at Bank of America since last year, stated in a report that the valuations of technology and AI concept stocks are too high, and suggested that investors should sell off US stocks.

Hartnett said that at present, the AI concept is in the "infant foam", and the interest rate increase cycle of the Federal Reserve may not be over. In the past, the formation of foam usually started with "loose monetary policy" and ended with interest rate increase. Taking history as a lesson, he believes that it is necessary to start selling when the S&P 500 is at 4200 points.