Nvidia Stocks: Thiel Dumps, AI Bubble Fears – What We Know

Julian Vance: Feature Article

[Generated Title]: Peter Thiel's Nvidia Dump: Genius Move, or Just Good Timing?

Alright, let's talk about Thiel and Nvidia. The headlines are screaming "AI bubble," and Thiel's Q3 filing – showing he completely exited his Nvidia position – is being treated as Exhibit A. But is this a sign of genius, or just really good timing? Or, perhaps, something else entirely?

Reading the Tea Leaves (and the 13F Filings)

First, the facts. Thiel Macro LLC dumped all 537,742 shares of Nvidia. At September 30th's closing price, that's roughly $100 million (though the actual value would have fluctuated throughout the quarter, obviously). That's a significant chunk of change, and it reduced Thiel Macro's disclosed equity holdings by almost two-thirds, from $212 million to $74.4 million. While Nvidia was being declared virtually untouchable, Thiel was heading for the exit.

SoftBank also sold off its Nvidia stake in October, raking in $5.83 billion. Their stated reason was to fund further OpenAI investments. Thiel's motives are less explicitly stated, but he has publicly expressed skepticism about the AI hype cycle outpacing the actual economics. Peter Thiel dumps top AI stock, stirring bubble fears

Now, let's inject some skepticism. Hedge funds buy and sell positions all the time. It's what they do. The narrative of Thiel dumping Nvidia to signal an AI bubble is sexier than the reality, which is that he likely had a thesis, made a profit, and moved on. The fund now counts Apple, Microsoft and a reduced stake in Tesla as its main bets.

The question is, what was that thesis? Was it purely a valuation call? Did he foresee a near-term correction? Or was he simply reallocating capital to other opportunities, perhaps including Substrate, the AI semiconductor startup he's backing? (He's also invested in AI startups Mercor and Cognition AI, according to reports.)

And this is the part of the report that I find genuinely puzzling. If Thiel truly believes the AI bubble is about to burst, why is he doubling down on AI startups? It doesn't quite add up.

The Burry Factor and the Circular Economy

Adding fuel to the fire is Michael Burry, of "The Big Short" fame, who has disclosed bearish wagers against both Nvidia and Palantir. He even posted a cryptic "sometimes, we see bubbles" message on X (formerly Twitter). Burry's track record commands attention, but it's worth remembering that even the best investors are wrong sometimes.

Burry has also criticized the accounting practices of hyperscalers like Microsoft and Alphabet, arguing that extended depreciation schedules are artificially boosting profits. This is a valid point. By stretching out the depreciation of their massive data center investments, these companies can make their earnings look better in the short term. It's not necessarily dishonest, but it does obscure the true cost of the AI arms race.

Then there's the issue of circularity. The AI industry is starting to resemble a closed loop, with chipmakers, startups, and data center operators all trading amongst themselves at inflated valuations. This creates the illusion of growth, but it's not clear how much of it is based on real demand from outside the AI ecosystem.

According to an analysis of 13F filings from 909 hedge funds, opinions remain divided about the prospects for AI companies. 161 increased their investment positions in Nvidia, while 160 decreased them during the three months to September. It's an even split.

Nvidia's quarterly sales are surging, from $39.3 billion to $46.7 billion, spearheaded by a 56% bump in data-center revenues. Analysts are even modeling a shot at $1 trillion in annual sales by 2030. However, it is critical to remember that the company hit a $5 trillion market value by riding the AI wave. Nvidia is considered the ultimate AI darling and any perceived distrust in Nvidia’s trajectory is taken as a negative sign for the AI industry overall.

Follow the Smart Money (or Not?)

So, what does it all mean? Is Thiel a visionary who saw the cliff coming, or just a savvy investor taking profits at the peak? The truth is, we don't know for sure.

Here’s what I think: Thiel's move is less about predicting a catastrophic collapse and more about recognizing that the easy money has been made. Nvidia's valuation had become detached from reality (even if it's still a great company), and he found better opportunities elsewhere.

The AI revolution is real, but the hype is definitely overblown. There will be winners and losers, and the current valuations don't reflect that.

The Hype is Real...The Valuations, Not So Much