Episode summary
Top tech investor Dan Niles on his decision to open a position in Nvidia amid selling
CNBC Fast Money
· · 5 min · Hosts: Seema Mody · Guests: Dan Niles
Summary
Dan Niles said he started buying Nvidia during the session because, in his view, the stock had already absorbed a lot of bad news and was trading at a valuation that fit his trading framework. He pointed to Nvidia at 12 times earnings, said it was down on the year, and argued that the selloff in semiconductors had already been severe enough that the market was discounting a major amount of risk. He also said he was not making a moral judgment about Jensen Huang’s conduct, but trying to assess how to position a portfolio and generate risk-adjusted returns.
Niles framed his decision against a broader bearish call he made in early October, when he said he was “terrified of the midterms” because bipartisan pushback against data centers could hurt the AI trade. He said that was the time to get negative, not now, and argued that the aftermath has already played out in the sector.
He also said the market should not assume Nvidia is immune to leadership risk, comparing the situation to founder transitions at Apple. But he emphasized that he is not long only, is managing against other positions, and will change his view if facts change or if Jensen Huang is asked to leave.
Key takeaways
- Dan Niles bought Nvidia because he thought the stock’s 12x P/E and year-to-date decline already reflected a lot of bad news.
- He said he became negative on the AI trade in early October, when bipartisan resistance to data centers looked like the bigger risk.
- Niles argued the semiconductor selloff has been deep enough that 14 of the 30 SOX members were down over 50% last Friday.
- He said he is not making a moral call on Jensen Huang, but is focused on portfolio positioning and risk-adjusted returns.
- Niles said he would change his stance if facts change, including the possibility that Huang is asked to leave.
Notable quotes
“I LOOKED AT NVIDIA AND WHERE IT'S TRADING AT 12 TIMES PE IT'S DOWN THIS YEAR”
“THAT WAS THE TIME TO GET NEGATIVE. NOT NOW. NOW, YOU'VE SEEN THE AFTERMATH OF THAT”
“I'M NOT HERE TO PASS MORAL JUDGMENT ONE WAY OR THE OTHER. I'M JUST TRYING TO FIGURE OUT, ALL RIGHT, HOW DO I DEAL WITH THE STOCK”
“A LOT OF MY NEGATIVITY IS STARTING TO GET REFLECTED. I DON'T KNOW HOW IT GETS MUCH MORE NEGATIVE THAN WHAT WE SAW TODAY ON NVIDIA”
“I'M TRYING TO FIGURE OUT THE AI TRADE IN GENERAL. AND THIS IS JUST ONE PIECE OF”
How the episode opens
About how that's actually ultimately a flat organization is a good one. This is a case where the flat was really all about jensen. And I think that's something to be concerned about as well. — All right. — For more on Nvidia and the ai trade, let's bring in niles investment management founder Dan Niles. Dan, great to great to have you with us. You started the day without any position in Nvidia, but you started to buy during the session. Why?
Well, you got to remember, unlike a lot of people, I put out something in early october saying was terrified of the midterms. You know, bipartisan pushback against data centers was the one thing that probably both sides of the aisle could agree on. So that was the time to get negative.
Not now. Now, you've seen the aftermath of that. And, you know, I looked at Nvidia and where it's trading at 12 times pe it's down this year.
It underperformed the sox by the way last year. And so at a 12 times pe I was like this matches well with some other types of names that I want to short which I don't think will survive, you know, one way or the other as you go out through time. So it was, you know, it's an unfortunate situation with jensen.
He made a mess. He knows he's made a mess. I'm hoping they work through that.
But also just an analogy, if you go back and you look at what's happened when founders have left, Apple is a great example of this, right? Steve jobs took his final leave of medical absence in january of 2011. He passed away, unfortunately, in october of 2011.
And you could say that he was a visionary ceo in the same mold as a video.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- nvidia position
- ai trade
- tech valuations
- midterms data center demand
- nvidia insider/leadership controversy
Companies and tickers mentioned
- NVDA
- AAPL
- Nvidia
- Apple
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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