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Is NVIDIA the WallStreetBets Darling Hedge Funds Can’t Resist?

Wesley ParkMonday, Apr 21, 2025 10:23 am ET

11min read

In the high-stakes world of tech investing, NVIDIA (NASDAQ: NVDA) has emerged as a lightning rod for both retail traders on WallStreetBets (WSB) and institutional investors. But here’s the twist: While hedge funds are trimming positions, WSB’s “meme-stock mentality” is keeping the flame alive. So which side is right? Let’s dive into the data and decide whether this AI powerhouse is a buy, a sell, or a “reckless all-in” play.

The Hedge Fund Pullback: A Vote of No Confidence?

Recent 13F filings reveal a stark divide among institutional investors. In Q1 2025, Stanley Druckenmiller’s Duquesne Family Office slashed its NVDA stake by 71%, while Coatue Management, Light Street Capital, and Matrix Capital Management cut holdings by 68%, 21%, and 20%, respectively. Even stalwarts like Baillie Gifford and D.E. Shaw took profits.

But here’s the catch: Not all funds are fleeing. Whale Rock Capital doubled down, boosting its NVDA position by 62%, making it their largest holding. This fund also snatched up Micron (MU) and Marvell (MRVL), signaling a bet on the broader semiconductor ecosystem.

The question is: Are hedge funds exiting because they see a bubble, or are they simply rotating to cheaper tech stocks? Analysts point to valuation concerns—NVDA’s P/E of 39.88 and 52-week price swings from $75 to $195 suggest volatility. Yet, its 55.69% net margin and $39.33B in Q4 revenue prove the company isn’t just a fad.

WallStreetBets: Fueling the Flames with FOMO

While hedge funds are cautious, WSB is all-in on momentum. NVIDIA’s role in AI, metaverse, and autonomous driving makes it a “growth narrative” poster child for retail traders. The subreddit’s members love volatility—they thrive on it.

The Q1 2025 earnings announcement was splashed across WSB threads, with users debating whether NVDA’s stock could hit $200 or crash back to $100. The allure? NVIDIA’s stranglehold on GPU technology, which powers everything from ChatGPT to self-driving cars. WSB’s playbook here is classic: leverage options, short squeeze speculation, and hype cycles.

But here’s the rub: NVIDIA’s short interest isn’t sky-high—unlike meme stocks like AMC or GameStop. Instead, WSB’s interest stems from its technological dominance, not just speculation.

The Financials: A Fortress on Shaky Ground?

NVDA’s Q4 2023 results were stellar: $0.89 EPS (beat estimates by $0.05) and $39.33B in revenue (up 47% YoY). Its AI Data Center segment grew 136% YoY, proving demand for its chips is real.

Yet, the dividend yield is a paltry 0.04%, and insider sales—like CFO Colette Kress’s $7.79M exit—raise eyebrows. Meanwhile, analysts are mixed: The consensus is “Moderate Buy” with a $165.51 price target, but some, like HSBC, have downgraded it to “Hold.”

The Risks: Valuation, Competition, and Geopolitics

Valuation Stretch: At $2.47 trillion market cap, NVDA is a growth stock in a slowing economy.
ARM Holdings’ Uncertainty: NVIDIA’s $40B ARM acquisition faces regulatory hurdles, threatening its AI expansion.
Taiwan Semiconductor (TSM) Competition: While TSM gets institutional love, NVDA’s AI edge is its moat—but can it stay ahead?

Conclusion: Buy the Dip, but Beware the Volatility

NVIDIA isn’t just a stock—it’s a bet on the future of computing. Hedge funds are right to be cautious about short-term risks, but WSB’s long-term vision isn’t wrong.

The numbers back this up:
- Whale Rock’s 62% stake increase signals confidence in AI’s long tail.
- Analysts’ $165.51 consensus implies 63% upside from current prices.
- NVIDIA’s 114.83% return on equity shows it’s converting innovation into profit faster than rivals.

Final Verdict: Buy NVDA on dips below $110—but set tight stops. This isn’t a “set it and forget it” stock. It’s a high-risk, high-reward play for those who can stomach volatility. If you’re all-in on AI, NVIDIA’s leadership position makes it worth the ride. Just don’t get caught holding the bag if the hype train stalls.

Jim Cramer’s style: Passionate, data-driven, and unafraid to call a spade a spade.

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