Confidence in Nvidia stock has been called into question following SoftBank’s decision to dump its stake in the rapidly rising stock. Nvidia at one point fell nearly 4% on Tuesday after the Japanese investment firm said it had zeroed out its position in the AI chip maker for $5.8 billion. This left investors wondering whether SoftBank’s decision to withdraw its stake bodes badly for Nvidia’s future stock performance, or whether it is simply trying to cash in on the market leader. “This is a situation that raises some eyebrows,” said Jay Woods, chief market strategist at Freedom Capital Markets. NVDA 1D Mountain Nvidia, 1st The sale comes after SoftBank announced it was pouring resources into OpenAI, the startup led by Sam Altman that developed the ChatGPT artificial intelligence bot. But even without directly owning 32 million shares, SoftBank’s fate is still intertwined with the chipmaker, given that the Japanese company is working on projects such as Stargate that use NVIDIA technology. Laying down the foundations SoftBank’s decision should be seen as a sign that OpenAI is preparing to go public in the near future, rather than a red flag for Nvidia’s prospects, Woods said, calling Tuesday’s exit a healthy move ahead of earnings scheduled for next week. “I don’t think this is a direct attack on Nvidia. I don’t think it’s going to impact the direction they continue to go,” Woods said. “If anything, it gives investors a reason to buy at today’s lows.” Despite Tuesday’s weakness, Nvidia is still up 66% over the past six months. Nvidia, a major beneficiary of the AI boom and considered a favorite on both Wall Street and Main Street, has soared more than 1,085% over the past three years. NVDA 5Y Mountain Nvidia, 5-Year Chart But in some quarters, SoftBank’s decision may heighten concerns that Nvidia and other major AI players are spending too much money and pushing valuations too high. “Big Short” investor Michael Varley, who recently shorted the technology, said on Monday that some AI hyperscalers may be using questionable accounting techniques to artificially inflate profits. He didn’t name Nvidia as a company whose earnings could slow, but said purchases of its products are driving the trend. “Significant increases in capital expenditures from purchasing Nvidia chips/servers over a two- to three-year product cycle should not lead to an extension of the useful life of computing equipment,” he wrote in X. “But this is exactly what all the hyperscalers have done. My estimates are that they will underestimate depreciation and amortization by $176 billion from 2026 to 2028.” Wells Fargo strategist Douglas Bies on Monday downgraded his investment rating on the S&P 500 information technology sector from favorable to neutral. Technology spending will continue to rise in 2026, but the best way to play this group is to lock in profits from time to time and shift to other lucrative areas, such as utilities and industrials, Bies wrote. Information technology has been one of the best-performing sectors in the S&P 500 this year, rising more than 26%. “Valuations have soared, and we are wary that overly bullish sentiment and heightened expectations for the group could leave the sector vulnerable to near-term disappointment,” Bies said in a letter to clients. “While some AI leaders reported significant AI-related capital spending in the third quarter, investor concerns about future payoffs and debt financing have spooked the market.”
