Nvidia Stock: Hedge Funds Trim Positions, Put/Call Ratio Now Looks Bearish Analyzing the Bearish Shift in NVIDIA Stock

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By Ronald Tech

NVIDIA Corp NVDA stock has been an investor darling throughout 2023, gaining 246% for the year, showcasing a remarkable rally. However, the latest filings divulged that hedge funds have trimmed their positions in Nvidia, signaling a notable shift in sentiment as we venture into 2024.

Even though the stock has already delivered over 47% returns in 2024, maintaining the street’s confidence in its AI-driven rally, market watchers are raising the alarm on the recent revelation from the hedge fund community.

Declining Hedge Fund Ownership

Hedge fund ownership of Nvidia stock decreased slightly from the third quarter to the fourth quarter, with the number of hedge funds holding Nvidia stock as a top 10 holding dropping by over 9%. The total number of 13F filers with Nvidia stock also saw a drop from 632 to 615. The shedding of ownership could potentially be attributed to profit-taking, considering the monumental trajectory of the stock throughout 2023.

On the other side of the coin, we also observed a decrease in the number of new hedge funds positioning into Nvidia stock, which reduced by 10.94%. As 64 hedge funds added Nvidia stock for the first time to their portfolio in the third quarter, a comparatively lower 57 extended their exposure to the stock in the fourth quarter.

Bearish Put/Call Ratio

The put/call ratio for Nvidia stock, a key indicator used to gauge investor sentiment, notably surged from 1.18 in the third quarter to 1.44, marking an increase of 22.03%. This steep uptick in the ratio points to a higher put volume than call volume, reflecting increased bearish sentiment amongst investors. This abrupt shift in the put/call ratio warrants close scrutiny, accentuating the need for caution among investors eyeing Nvidia stock.

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While the hedge fund community overall scaled back their Nvidia holdings, it’s worth noting that certain experienced hedge fund managers saw fit to boost their stake in the stock. This divergence in activity within the hedge fund universe adds complexity to the narrative surrounding Nvidia’s future prospects.

Investors are advised to exercise prudence and vigilance if contemplating an investment in Nvidia stock as these nuances manifest a shift in market sentiment and raise red flags for prudent shareholders.

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