Hedge Fund Liquidates Nvidia Stake Amid Industry Challenges

Jonah Cheng, the founder of a hedge fund that achieved a 42% return last year, has completely liquidated his fund's stake in Nvidia, a semiconductor manufacturer with a market capitalization of 3.5 trillion dollars. This decision marks a significant shift in the fund's investment strategy, as Cheng had previously praised Nvidia as the best stock pick of his career.

Cheng, a former analyst at a prominent investment bank, established Captain Global Fund in 2016, and one of the first stocks he purchased was Nvidia. Over the years, he continued to invest in the company, benefiting from its stock price surge. However, recent developments have led Cheng to reassess his stance on Nvidia's prospects.

In the first quarter of this year, Cheng began selling off Nvidia's stock, citing concerns over delays related to the GB200 server. He pointed out several factors that contributed to his decision to avoid the stock, including inventory risks, unmet earnings expectations, and competition from custom chips.

Despite his decision to sell, Cheng expressed his admiration for Nvidia, acknowledging that the stock has been instrumental in generating significant returns for his fund. Managing approximately 100 million dollars in assets, Cheng emphasized the importance of making tough decisions in the investment process. He stated that when it is necessary to sell, one must do so without hesitation, and not become emotionally attached to any particular stock.

This move by Cheng's hedge fund comes at a time when the semiconductor industry is navigating various challenges, including supply chain disruptions and geopolitical tensions. The liquidation of Nvidia's stock by the fund could be seen as a precautionary measure to mitigate risks associated with these uncertainties.

Cheng's decision to sell off his entire stake in Nvidia highlights the dynamic nature of the investment landscape and the need for fund managers to remain adaptable in the face of changing market conditions. As the semiconductor industry continues to evolve, investors will be closely monitoring the performance of key players like Nvidia and adjusting their strategies accordingly.