Why Institutional Money is Getting Out of Nvidia: A $5 Trillion Valuation Story That Looks Unsustainable

The AI Chip King’s Unstoppable Run (And Why It Might Be Ending)

Nvidia’s ascent to become the world’s first $5 trillion publicly traded company wasn’t built on hype alone. The company’s graphics processing units (GPUs) have fundamentally redefined enterprise data centers, with their three premier AI-GPU generations—Hopper, Blackwell, and Blackwell Ultra—consistently commanding astronomical prices. Enterprise customers are willing to pay $30,000 to $40,000 per high-powered AI-GPU, a premium that reflects genuine scarcity and unmatched performance.

CEO Jensen Huang’s strategic mastery is evident in every direction you look. The company’s CUDA platform acts as a technological moat, locking customers into Nvidia’s ecosystem for years. No external competitor has come close to matching Nvidia’s compute performance across generations. With annual AI chip releases scheduled through the foreseeable future, Nvidia maintains hardware superiority. Recent mega-deals amplify this dominance—a September partnership with OpenAI alone involves $100 billion in progressive investment and 10+ gigawatts of AI infrastructure deployment using Nvidia’s next-gen Vera Rubin chips, rolling out in the second half of 2026.

For institutional investors, this was a dream scenario. The stock has surged 1,120% since 2023 began, minting fortunes for early believers. Robinhood’s retail investor leaderboard now ranks Nvidia as the No. 1 most-held stock among everyday traders, toppling even Tesla earlier this year.

But here’s where the story gets interesting: the smartest money might be quietly heading for the exits.

The Insider Signal Nobody Wants to Talk About

Form 13F filings reveal what sophisticated investors actually believe, not what they say publicly. Philippe Laffont, the billionaire managing Coatue Management, offers a masterclass in this principle. As of late September 2025, his fund held $40.8 billion in assets under management, comfortably exceeding the $100 million threshold that triggers SEC filing requirements.

The numbers tell a story of systematic retreat. In March 2023 (adjusted for Nvidia’s historic 10-for-1 forward split from June 2024), Coatue held approximately 49.8 million Nvidia shares. By September 30, 2025—just two and a half years later—this position had collapsed by roughly 80% to under 10 million shares. The latest quarter alone saw over 1.6 million shares liquidated.

Profit-taking offers an easy explanation. After all, when a position has tripled or quadrupled in value, taking some chips off the table makes mathematical sense. But Laffont is no retail trader chasing quick gains. His move suggests something deeper: a fundamental reassessment of where this technology cycle is headed.

History Has a Sobering Message About Revolutionary Technologies

Here’s what Laffont and other seasoned investors understand that many retail traders don’t: every transformational technology goes through predictable stages, and the middle of the hype cycle is when the smartest exits happen.

Look at the historical playbook. The internet seemed limitless before the dot-com crash. Nanotechnology promised to revolutionize everything before funding evaporated. Blockchain believers spoke of world-changing applications before the first crypto winter. 3D printing was supposed to reshape manufacturing. The metaverse was deemed the inevitable future of human interaction. In each case, investors consistently overestimated adoption timelines, utility achievement, and optimization speeds.

When bubbles burst, the companies that benefited most directly—the pick-and-shovel providers—absorb the heaviest losses. If an AI correction occurs (and history suggests it will), Nvidia, as the primary infrastructure beneficiary, would be among the hardest hit.

The valuation picture amplifies these concerns. Nvidia’s price-to-sales (P/S) ratio has repeatedly exceeded 30 in recent months—a level that aligns with historical peaks for transformational tech companies. Over the past three decades, companies leading next-generation innovations typically peaked at P/S ratios between 30 and 40. Once the narrative matured and reality set in, these valuations compressed dramatically. Nvidia’s current metric, combined with scorching sales growth, appears extended by historical precedent.

The Concentration Risk That Nobody Discusses Enough

Beyond valuation concerns, a critical vulnerability lurks in Nvidia’s revenue structure. A stunning 61% of Nvidia’s third-quarter fiscal sales came from just four direct customers. That’s not diversification—that’s concentration risk at its highest.

If one or two of these mega-clients encounter operational challenges, reduce orders, or face their own market disruptions, Nvidia’s growth trajectory could stall abruptly. The company that appeared to have insatiable demand could suddenly face inventory normalization. Enterprise customers, flush with AI investments that haven’t generated expected returns yet, might hit the pause button on new deployments.

What This Means for Robinhood’s Favorite Stock

The gap between retail enthusiasm and institutional confidence is widening. While everyday investors on Robinhood embrace Nvidia as their top holding, institutional managers like Laffont are methodically reducing exposure. This divergence—retail buying into strength while smart money exits—has preceded numerous market corrections historically.

None of this means Nvidia is a bad company. Its competitive advantages are real and durable. The GPU shortage remains genuine, and AI infrastructure buildout will continue. But transformational narratives have a way of getting ahead of fundamentals, and valuations don’t remain unsustainable forever.

Investors would be wise to consider Laffont’s 80% position reduction as more than just profit-taking. It’s a signal from someone who has successfully navigated multiple technology cycles that the risk-reward calculus may be shifting. The question isn’t whether Nvidia will matter in the future—it almost certainly will. The question is whether it’s priced for a perfect scenario or for realistic outcomes.

As analyst Sean Williams has observed in similar situations, when institutional conviction starts eroding even as retail enthusiasm peaks, the market eventually resolves the disconnect.