NVIDIA Shares Tumble 13%: Is It Time to Buy or Bail?

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Last month, NVIDIA announced impressive earnings along with news of a 10-for-1 stock split, which directly sparked a new round of vitality in the company's share price. At that time, founder Jensen Huang emphasized in the earnings conference call that the next industrial revolution had already begun. Wall Street also then began a significant bullish surge.

However, beneath this surge, Huang and NVIDIA executives began to reduce their holdings and cash out frequently.

According to SEC filings, Huang executed a pre-arranged trading plan under Rule 10b5-1 on March 14, and from June 13 to June 21, he sold a cumulative total of 720,000 NVIDIA shares, cashing out USD 94.6 million, with an average sale price of $131.44 per share.

Data from Washington Service shows that, excluding the impact of the 10-for-1 stock split on June 10, NVIDIA executives and directors have cumulatively sold approximately 770,000 shares, with the cash-out amount exceeding USD 700 million, which is roughly 5.1 billion yuan.

Since NVIDIA announced its first-quarter earnings, more than one-third of insiders have chosen to reduce their holdings, with the speed of selling reaching a multi-year high.

However, overall, the executives' sales represent a small proportion of the company's total shares, so the actual impact on the share price is minimal, with the decline being more of an emotional effect. NVIDIA's stock price drop is more due to some investors taking profits, with no fundamental changes in the company.

In terms of valuation, according to Bloomberg consensus forecasts, NVIDIA's EPS for fiscal years 2025 and 2026 are predicted to be $2.69 and $3.53 respectively, giving a PE ratio of 44x and 33.46x at the current share price, indicating a reasonably high valuation.

Investors who hold NVIDIA shares at a low cost can continue to hold, while they can also sell high-priced calls to earn premium.

Investors who entered at high prices and are trapped can similarly adopt the strategy of selling calls to earn premium and reduce losses.

For investors who have not yet entered, the current valuation is still not low, so they could use a strategy of selling puts to effectively lower the cost basis of holding NVIDIA shares. Additionally, they could employ a strategy of gradually buying into NVIDIA on dips.

NVIDIA's shareholder meeting is approaching, and the Federal Reserve is about to begin cutting interest rates. Looking at the subsequent event-driven factors, there is still no substantial reason for NVIDIA's share price to undergo a major correction.