Actions of Nvidia (NASDAQ: NVDA) On Tuesday, the company's shares rose 4.8%. As of 3:20 p.m. ET, the stock was still up 4%.
The catalyst that sent the chipmaker and Artificial Intelligence (AI) Experts reported that the company's CEO had finished selling shares for now.
Sales of over $700 million
CEO Jensen Huang has sold a big block In recent months, he has sold nearly 6 million shares of Nvidia, a move that has raised eyebrows among investors. In total, he has sold about 6 million shares worth about $713 million as part of a pre-arranged stock trading plan that was launched earlier this year.
The sales were conducted pursuant to a 10b5-1 plan, which allows insiders to sell shares in the future on a predetermined schedule without violating insider trading rules. In more than four dozen transactions over the past three months, Huang dumped 6 million shares, hitting the limit set in the pre-arranged plan, suggesting the chief executive was done selling Nvidia stock, at least for now.
Some investors tend to get nervous when insiders sell stocks, especially in large quantities. Rumors often circulate that “they know something we don't” or “the stock has peaked.”
The reality is much more mundane.
However, there are plenty of reasons to sell stock, especially if it makes up a significant portion of an executive's compensation package. That's certainly the case for Huang, as 96% of his total pay is stock options tied to the overall performance of Nvidia's stock. As a result, and in order to reap the rewards of successfully driving the stock to new heights, Huang and other executives must sell stock, so there's nothing worrying or ominous about these sales.
Furthermore, Huang remains the largest individual shareholder of Nvidia stock. According to the company’s latest proxy statement, Huang controlled more than 93 million shares, or over 3.75% of the shares outstanding. This alone suggests that Huang is still confident in Nvidia’s future prospects.
Bottom line: nothing to see here, folks. Move on.
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Danny Vena has positions in Nvidia. The Motley Fool has positions in Nvidia and recommends it. The Motley Fool has a Disclosure Policy.
Why Nvidia shares rose on Tuesday Originally published by The Motley Fool