(Bloomberg) — Seligman Investments' Paul Wick has been reducing his holdings in Nvidia Inc. in recent weeks, questioning the company's profit-growth prospects and slashing the stock's stake in the stock market darling.
“Our enthusiasm has tempered somewhat over the past week or two,” Wick said in a video call from a UBS Group AG event in Singapore on Friday, without elaborating on how much of the stake had been cut.
Mr. Wick, who has invested in the tech industry for about three decades, compared the boom times of Nvidia and Cisco Systems during the dot-com bubble. “Their high valuations and lack of recurring revenues made them inherently risky businesses,” he said.
Nvidia gets about 60% to 70% of its revenue from its 10 largest customers, “making it an inherently riskier company than a Microsoft or Google, which have very low customer concentration and thousands of customers,” said Wick, who runs the $13.5 billion Columbia Seligman Technology & Information Fund.
The chipmaker recently briefly became the world's most valuable company after its shares more than tripled in the past year on hopes for artificial intelligence. But many investors expect the rally to continue, and Wick and Rob Arnott of Research Affiliates LLC are among the few to disagree.
Nvidia shares trade at 43 times expected earnings for the next 12 months, making it more expensive than all but one of its peers in the Philadelphia Semiconductor Index.
Wick said generative AI companies that have spent billions of dollars on Nvidia's systems have seen a poor return on investment. He added that “many of Nvidia's major customers are actively designing their own processors, including Alphabet Inc.'s Google, Microsoft Corp. and Meta Platforms Inc.”
The stock is one of his fund's top holdings, and the fund has outperformed 97% of other stocks over the past three years, according to data compiled by Bloomberg.
Wick said Nvidia “needs to demonstrate that it can continue to grow at a strong pace.”
–With assistance from David Ramli.
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