When it comes to Nvidia (NASDAQ: NVDA) stock, I’m a long-term bull. Indeed, back in March, I said that if I could only own one stock for the next decade, it would be the US-listed chip designer.
Last week, however, I did something crazy. I sold a few of my shares in the company.
Why I sold
There are two main reasons I decided to sell some Nvidia shares.
The first is that they’ve had an incredible run this year on the back of interest in artificial intelligence (AI).
Believe it or not, Nvidia’s share price started 2023 at $146. When it spiked up to $478 last week (a year-to-date gain of 227%) I just felt that I had to bank some profits.
When stocks start rising exponentially, it always worries me a bit as sharp share price increases are typically not sustainable.
Bear in mind that my average entry point here is a little over $200 per share, so I was sitting on a decent profit when I offloaded some stock.
The second reason I sold was for portfolio risk management.
After their recent strong run, Nvidia shares had quite a large weighting in my portfolio. I just felt that it was prudent to reduce the size of my position a little, given the fact that Nvidia’s share price can be very volatile (this is a stock that regularly has 30%+ pullbacks).
So, I sold 24% of my holding.
I’m still a bull
I’ll point out that I’m still very optimistic in relation to Nvidia’s long-term prospects.
This is a company that’s exposed to many high-growth industries including:
- AI
- Cloud computing
- Data centres
- The metaverse
- Autonomous vehicles
- Video gaming
It’s the potential in AI that looks the most exciting, to my mind.
Today, just about all of the big players in AI, including Google, Microsoft, Meta, and ChatGPT owner OpenAI use Nvidia’s ‘accelerated computing’ products to power their applications.
And Nvidia CEO’s Jensen Huang believes that in the years ahead, $1trn of installed global data centre infrastructure will transition from general purpose infrastructure to accelerated computing as organisations race to apply generative AI to their business processes.
If Huang is right about this, the chip designer is likely to get much bigger from here.
A win-win move?
It’s worth noting that after selling 24% of my stake, Nvidia is still a relatively large holding for me. It remains a top 10 position in terms of my individual stock holdings.
So, I can still potentially benefit from any share price upside from here.
However, taking some profits has reduced my risk levels.
It has also freed up some cash to invest elsewhere — I have my eye on a few other exciting growth stocks right now that I think could explode in the years ahead.
So, the way I see it, selling 24% of my holding was a win-win move.
