Why Nvidia’s 'big sellers' might secretly be its biggest believers

Nvidia's latest round of share sales, which included SoftBank's $5.8 billion departure and other institutional cuts, led to inevitable rumors: Is the AI trade losing its appeal?

Upon closer examination, the scenario changes. SoftBank isn't backing away from AI; instead, it's putting more money into OpenAI, robots, and data centers that use Nvidia's own processors.

And the Street isn't exactly hiding from it, either. Bank of America analysts said in a recent research note that the current wave of "AI skepticism" is "healthy but overstated." They also said that it is "likely a contrarian positive, helping to minimize overcrowding."

As they put it:

In other words, what appears like selling can be a rotation, not a retreat, inside the same AI boom.

SoftBank sold Nvidia to fund AI, not flee it

The news of SoftBank selling its whole Nvidia investment for $5.83 billion made headlines, but the deal indicates more about liquidity than a lack of trust.

The Japanese conglomerate sold 32.1 million Nvidia shares in October, with part of its T-Mobile holdings, as part of what it characterized as a plan for “asset monetization.”

“We want to provide a lot of investment opportunities for investors, while we can still maintain financial strength,” said SoftBank Chief Financial Officer Yoshimitsu Goto during an investor presentation.

“So through those options and tools we make sure that we are ready for funding in a very safe manner,” he added, in comments translated by the company.

Related: Stagwell’s Palantir pact boosts shares, slashes labor needs

The money from Nvidia and T-Mobile sales, as well as a margin loan on SoftBank's Arm holdings, will help fund $22.5 billion in new investments in OpenAI and other initiatives, such as acquiring ABB's robotics business.

The sale of the share also contributed to SoftBank's great quarter, as its Vision Fund made $19 billion and helped the business treble its profits. SoftBank still has a lot to do with the AI ecosystem, from big language models to robots, even if it sold its Nvidia shares. A lot of this still operates on Nvidia technology.

SoftBank may rejig its portfolio, but it still believes in the same future that Nvidia is working toward.

Big investors are trimming Nvidia: Here’s why they’re still bullish on AI

SoftBank wasn't the only one to cut down on Nvidia stock this year, but the reasons on Wall Street appear more like a cleanup than a rule-breaking move.

Several big investors, including State Street, Bridgewater Associates, and T. Rowe Price, have soldpart of their NVDA stakes in the last few quarters. This is mostly because they want to keep their portfolios from being too concentrated following Nvidia's spectacular run.

More Nvidia:

• Nvidia makes a major push for quantum computing
• Nvidia’s next big thing could be flying cars
• Bank of America revamps Nvidia stock price after meeting with CFO

Insiders, including CEO Jensen Huang, have also sold shares as part of pre-planned 10b5-1 trading strategies. This lets them lock in profits while keeping their total exposure unchanged.

At the same time, institutional ownership remains quite high, and no major investor has stated that their sale was a result of a change in belief. Many funds have moved money into AI-related businesses, including data center operators, power supply companies, and semiconductor equipment producers.

Related: Tesla: what must happen for the $1 trillion payout

These businesses all support the same ecosystem that Nvidia controls.

Analysts say that this phase is not a retreat but a rebalancing period. It's normal for things to change once they go up five times in less than two years. They argue the most important thing is that the people who bought those stocks still want to be involved with AI, which keeps Nvidia at the center of the narrative.

The market can rotate out of Nvidia’s stock, but not out of its story

When Nvidia sells, the market typically views it as a vote on the entire AI boom. However, the evidence suggests a different direction. The large investors, such as SoftBank and Bridgewater, are not backing down; they are repositioning.

Even though there has been some "AI skepticism" in the air lately, Nvidia's fundamentals appear extraordinarily strong. It has booked data center orders worth about $500 billion, is building partnerships in Germany and South Korea, and has a global supply chain built around its architecture. Those things don't show that a corporation is losing momentum.

The latest stake cutbacks demonstrate the significant portion of the market's AI exposure now routed through Nvidia and the difficulty investors face in completely exiting the market.

Selling the stock may spark discussion, but the narrative always returns to the same point: Nvidia remains the driving force behind the AI economy, and a single bad quarter or a few significant exits won't alter that.

Related: Arm’s 'AI tollbooth' keeps ringing, but SoftBank’s 16% sales slice is the tell