In a Nov. 10 CNBC interview, investment manager Dan Niles said he had begun buying Nvidia while maintaining shorts in other chipmakers, citing the sector’s selloff and Nvidia’s valuation.
The founder of Niles Investment Management said he entered the session without Nvidia shares. He put the stock’s valuation at 12 times earnings and said that supported adding it while he kept positions against chip companies he thought could struggle over time. Niles described the combination as a way to balance potential returns against risk.
Niles put the SOX semiconductor index’s decline at 36% between its June 22 peak and Nov. 6. He said 14 of its 30 members had lost more than half their value. To him, the losses showed that share prices had begun to account for concerns he raised before the selloff.
Niles said he had warned in early October about the midterm elections, citing opposition to data centers from both political parties. He believed investors should have taken a negative view of the sector then. After the decline, he said, he shifted his attention to prices.
Niles said several semiconductor stocks rose more than 10% during the session. Separately, he said he had returned to short positions in some chipmakers after the rebound, without naming the companies.
He also said risks involving Nvidia CEO Jensen Huang might not be fully reflected in the stock’s valuation. Niles said Huang could face pressure to leave and that new facts could lead him to change his Nvidia position.
Nvidia’s fiscal third-quarter revenue forecast of $108 billion provides a benchmark for its upcoming earnings report.
