Insider buying is considered an important metric to gauge the prospects of further gains in a particular stock. After all, if the people with the most intimate knowledge of a company’s prospects are putting their own money on the line, particularly in the absence of discount-based incentives, it gives investors a powerful impetus to go all in. However, this particular incentive has been absent for NVIDIA investors since the end of 2020.
NVIDIA’s last insider buy transaction took place in December 2020, when Colette Kress, the GPU maker’s CFO, bought 200 shares for a little over $100,000.
Since then, NVIDIA shares are up 225 percent. However, this period has been atypical for its lack of a single insider buy transaction.
What’s more, as per the tabulation by Barchart, NVIDIA insiders have sold nearly a million shares in the last 12 months, with around 400,000 shares sold in the last three months alone.
Of course, this does not mean that insiders haven’t increased their exposure to NVIDIA stock. After all, compensation-based stock options have continued to vest. However, the fact that the company’s insiders haven’t placed a single dime of their own on the proverbial line to acquire additional shares in 2.5 years is an aberration.
Meanwhile, as we noted in a previous post on this topic, NVIDIA has been up around 200 percent since the start of the year, egged on by expectations that the company corner a significant chunk of the AI training market via a dedicated suite of products under the ambit of its AI Foundation Services to enable clients to create and run customized generative AI models. According to JP Morgan, the chipmaker would remain the primary beneficiary of AI-related spending this year, scooping up as much as 60 percent of the proverbial pie.
Even so, the stock has been roughly flat since last Thursday, leading some bears to speculate that the latest phase of this AI-fueled mania might well be over, at least until the next major stimulus arrives.
Do you think the lengthy drought of insider buy transactions vis-à-vis NVIDIA is a significant black mark against the stock’s prospects? Let us know your thoughts in the comments section below.
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