Concerns that Nvidia's rapid growth is unsustainable have also spread to ESG investment managers, which beat the market with big bets on the stock last year.
“While we are optimistic for the long term, we recognize that valuations are not necessarily attractive,” he said last year, which made Nvidia the largest holding in Swedish Bank Robar Technology, making it one of the world's top performers. said Christopher Barrett, who oversaw the decision to change to. Ranking of ESG funds by Bloomberg. Swedbank's fund, which is registered under European Union rules as “promoting” environmental, social and governance indicators, returned 53% in 2023.
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But Barrett said there are now concerns that Nvidia could become a victim of its own success.
“There's a perception that this has become a retail stock,” he said. “And that potentially portends a bubble.”
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Overall, the percentage of ESG funds holding Nvidia stocks has fallen from a high of 20% in Q2 2023 to 15% of the total at the end of December, according to the latest data provided by Morningstar Direct.
The figure covers equity-oriented open-end and exchange-traded funds that meet Morningstar's ESG criteria, and the value of these funds' exposure to Nvidia was approximately $17.6 billion at the end of last year, compared to the end of last year. This indicates a decrease of approximately 10%. During the same period, Nvidia's market value rose by 17%.
Nvidia enthusiasts are excited about the company's ability to develop artificial intelligence after CEO Jensen Huang successfully built a niche maker of graphics cards for gamers into a $2 trillion tech giant. He points out that he has a firm grasp on the chips. And so far, warnings of sudden declines in NVIDIA stock have typically been followed by impressive gains.
Last year, NVIDIA's market value skyrocketed by about 240% and is already up about 80% in 2024. Of his 66 analysts tracking NVIDIA, none are advising clients to sell, and 60 are advising investors to keep buying the stock, according to data compiled. It states that. By Bloomberg.
ESG funds that bet big on Nvidia have outperformed their peers. These include the RobecoSam Net Zero 2050 Climate Change Equity Fund, which is registered under the EU's most stringent ESG disclosure rules. Chris Berkower, who manages the Robeco Fund, said Nvidia is being treated as a “transition facilitator” in his portfolio, based on the idea that its technology can help companies across all industries reduce their environmental footprint.
The $150 million fund, which counts Nvidia as one of its largest holdings, has gained about 7% in the last month, outpacing more than 90% of its peers, according to Bloomberg data.
“We remain very optimistic about Nvidia,” Berkower said. “The AI dream lives on,” he said, as Nvidia's latest quarterly results were used by the company to announce revenue forecasts that once again beat analyst expectations.
Bloomberg Intelligence says:
Nvidia has significantly increased supply to meet the surge in demand, and demand this year is expected to exceed all-time highs for revenue, EBITDA, net income, operating cash, and free cash flow. Upgrades from both Moody's and S&P in 2023 highlight the company's sustainable competitive advantage in the accelerated computing category.
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Nvidia Ebitda Consensus F2025-2027:
“Revenues increased even more despite the significant price increase,” Berkower said, noting that Nvidia is part of a “balanced mix” of his portfolio. “This is really great and a testament to NVIDIA's ability to successfully meet that demand.”
But as NVIDIA has transformed into one of the world's largest companies, skepticism has also grown. Despite being outspoken about the transformative potential of AI stocks early in the economic cycle, Cathie Wood aggressively reduced her exposure to Nvidia and other big-name stocks associated with the AI boom last year. reduced to.
And hedge funds that flocked to tech stocks ahead of Nvidia's latest earnings report are now exiting at the fastest pace in seven months, according to data from Goldman Sachs Group Inc.'s prime brokerage division.
An Nvidia spokesperson declined to comment.
Barrett, who will leave Swedbank for a role at another company whose name cannot be disclosed pending an official announcement, was replaced as portfolio manager of the Swedbank Robber Technology Fund in February.
Christian Brink, who currently runs a Swedbank fund, said some investors could seize the opportunity and profit, and that Nvidia “may be a bit limited” in the short term. .
The outlook for the future is bright. “We think people tend to underestimate the long-term impact of generative AI, and Nvidia is an enabler of that technology,” Brink said.
And Nvidia remains the fund's largest holding, accounting for almost 10% of Swedbank's portfolio, which currently stands at about $15 billion, he said.
Bubbles are “always a concern,” Brink said. “I don't think it exists, but there are a lot of factors for the generation AI to become one. We're monitoring that.”
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