Whale Rock Capital Management executed a number of noteworthy portfolio changes during the second quarter, yet one deserves special attention. Namely, the hedge fund sharply reduced its exposure to Nvidia (NVDA) in Q2.
According to the most recent 13F filing from the firm, Whale Rock decreased its Nvidia holding from approximately 1.04 million shares to 377,204 shares in Q2. This marks a reduction of about 64%, which is quite a significant step for a company at the heart of the AI infrastructure boom. On the other hand, Whale Rock increased its Advanced Micro Devices (AMD) stake from just 69,211 shares to roughly 1.51 million shares. Therefore, one can safely say that this was not a complete selloff of AI semiconductor stocks. Let's take a closer look.
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Nvidia Stock Overview
Based in Santa Clara, California, Nvidia (NVDA) designs GPUs, networking products, accelerated computing platforms, and software for a wide range of markets, including data centers and gaming. Nvidia has emerged as a leader of computing infrastructure for artificial intelligence (AI), bringing its market capitalization to $5.24 trillion today.
NVDA stock currently trades near $215 per share, only about 10% shy of its 52-week high of $236.54 and roughly 24% above the 52-week low of $164.07.
www.barchart.com Valuation is another matter. NVDA stock trades at a forward price-to-earnings (P/E) multiple of 25.2 times and approximately 24.3 times sales. These multiples are far from cheap, especially taking into account the fact that the company already enjoys a market cap of more than $5 trillion. However, the forward P/E ratio looks much less extreme if considered alongside Nvidia's growth rates. The company recently increased quarterly revenue by 85% year-over-year (YOY), which means that while there is still a high premium, earnings are growing exceptionally fast.
Interestingly, Whale Rock's stock sale doesn't look like a simple bearish view on the entire AI story. The fund increased its AMD holdings in the same quarter and also significantly reduced its Broadcom (AVGO) stake. Therefore, this seems to be a major reshuffling of the fund's AI exposure rather than a complete retreat.
Nvidia Posts Record Revenue Growth Driven by Accelerated AI Adoption
Nvidia's latest results for the first quarter of fiscal 2027 provide another point of view on the matter. Revenue reached a record $81.6 billion, a massive 85% YOY increase and a 20% sequential climb. Data Center revenue increased even more rapidly, rising 92% YOY to a record $75.2 billion.
Non-GAAP EPS reached $1.87, posting a 140% YOY increase, while non-GAAP operating income increased 147% YOY to $53.8 billion. Nvidia also posted a non-GAAP gross margin of 75%, demonstrating that even the fastest revenue growth continues generating exceptional profit margins.
However, the more important thing is that management expects the trend to continue. Nvidia guided Q2 revenue at approximately $91 billion, plus or minus 2%, even excluding any Data Center compute revenue from China. At the midpoint, this implies another sequential increase of about 12% from $81.6 billion in Q1.
Accordingly, it's hard to interpret the Whale Rock sale as a sign of weakness in Nvidia's business fundamentals. While a 13F filing demonstrates what funds hold at the end of the quarter, it provides no information about the reasons for selling or exact dates of the transactions. Whale Rock could be trying to decrease its concentration, lock in profits, or allocate more money to the companies with higher potential upside.
Nvidia remains quite confident about its outlook on cash generation as well. The company's board authorized an additional $80 billion of stock repurchase in May, while the quarterly dividend was increased to $0.25 per share.
What Do Analysts See for Nvidia Stock?
Analysts' targets are still meaningfully above Nvidia's current stock price, with Wall Street assigning a consensus “Strong Buy” rating for NVDA stock overall. The average price target of $304.32 implies potential upside of 42% from current levels. The lowest price target for Nvidia stock is $180, while the highest target is $500 per share.
Nvidia has had an impressive multiyear run, but analysts seem to expect further price appreciation. While Whale Rock's decision deserves close attention due to its size, investors shouldn't interpret the quarterly positioning by a single hedge fund as an investment thesis. The more important thing here could be where the money moved — from Nvidia and Broadcom to AMD.
www.barchart.com On the date of publication, Yiannis Zourmpanos did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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