Shares of Nvidia (NASDAQ: NVDA) rose higher on Tuesday, rising as much as 4.8%. At 3:20 PM ET, the stock was still up 4%.
The catalyst that sent the chipmaker and artificial intelligence (AI) specialist to the next level were reports that the company’s CEO was done selling shares for the time being.
CEO Jensen Huang has sold a large block of Nvidia shares in recent months, a move that caught investors’ attention. In total, he sold about 6 million shares worth about $713 million as part of a pre-arranged stock trading plan set up earlier this year.
The sales were made under a 10b5-1 plan, which allows insiders to sell shares in the future on a predetermined schedule without running afoul of insider trading rules. In more than four dozen trades over the past three months, Huang has sold six million shares, hitting the limit set in the prearranged plan, indicating the CEO was done selling Nvidia stock – at least for now .
Some investors tend to get nervous when insiders sell shares, especially in large quantities. Rumors that “they know something we don’t know” or that “stocks have peaked” often circulate.
However, there are plenty of reasons to sell shares, especially if they make up a large part of an executive’s compensation package. That’s certainly the case with Huang, as 96% of his total compensation consists of stock options tied to Nvidia’s overall stock performance. As a result, and in order to reap the rewards of successfully navigating the stock to new heights, Huang and other executives need to sell shares, so there is nothing worrisome or shameful about these sales.
Furthermore, Huang is still the largest individual holder of Nvidia stock. According to the company’s most recent proxy statement, Huang owned more than 93 million shares, or more than 3.75% of the shares outstanding. This alone suggests that Huang still has confidence in Nvidia’s future prospects.
In short: there’s nothing to see here, folks. Move it along.
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