Recently, I saw an interview video online where Sequoia Capital partner Shaun Maguire recalled his mistake of selling Nvidia shares too early.
Regarding selling Nvidia shares too early, I had previously read about Masayoshi Son's experience with this. Seeing another well-known investor regret his decision with Nvidia gave me more to think about from a different perspective.
In the interview, Shaun talked about his investment in Nvidia:
He bought Nvidia shares during its IPO when he was only 13 years old. Because he enjoyed playing games, he was particularly optimistic about Nvidia's future.
He held onto Nvidia shares until its market value reached $600 billion.
Nvidia, valued at $600 billion, had its gaming and data center businesses each accounting for half of its revenue. He felt the valuation was insane, so he sold it.
We all know what happened next: Nvidia's market capitalization soared, eventually exceeding $5 trillion.
Sean missed Nvidia's glorious journey from $600 billion to $5 trillion.
The reason for his premature sale can be summarized in two points:
First, he thought he was too knowledgeable, even too calculating, thus underestimating Jensen Huang and his potential.
Sean's background is impressive; he loves playing games, but it didn't affect his studies at all. He has a PhD in physics from UC Berkeley, is very knowledgeable about chips and investments, and has a very clear understanding of the financials. However, this very fact limited his understanding of Jensen Huang.
Sean's background is very impressive. He loves playing games, but it didn't affect his studies at all. He is a physics PhD from UC Berkeley, very knowledgeable about chips and investments, and has a very clear understanding of the financials. But this is precisely what limited his understanding of Jensen Huang.
He believed his IQ level (Level 10 by his standards) was too low to understand the operations of someone like Huang (Level 15 by his standards), just as an ant couldn't understand a human building a highway. Secondly, he believed he hadn't foreseen the market's potential. Sean had studied Broadcom, TSMC, and ASML early on and was very knowledgeable about semiconductors, thus considering Nvidia's aggressive expansion of computing power irrational. However, subsequent developments exceeded most people's expectations—the sudden surge in AI validated the foresight of Nvidia's decision to expand computing power. Of these two reasons for selling too early, I think investors shouldn't be too hard on themselves regarding the second one. This is because it involves too much chance, and such chance cannot be predicted or calculated using logical reasoning. Regarding ChatGPT's stunning global debut in November 2022, I believe that, with the exception of a very few industry insiders, most people could not have predicted this historical turning point. Without this debut, or rather, without the unexpectedly rapid development of AI, I believe Nvidia today might still be just an excellent, but certainly not top-tier, tech company hovering between $600 billion and $1 trillion in market value. Therefore, at that time and in that context, Sean's view that Nvidia's approach was too aggressive, I don't think there was any logical error in it. The first reason, however, can be used by investors to improve their methods and learn from experience. This reason leads to two simple approaches: - Investing is about investing in people. If a company's business model is sound, and you trust its leadership team, you can seriously consider investing in that company. - To truly reap substantial returns from a good company, I increasingly believe the best approach is long-term holding. Recalling the books and videos I've read and watched over the past year or two, the most successful cases of historically great investors are basically those who chose to hold the companies they believed in for the long term. As long as the company's fundamentals don't change significantly, they generally hold long-term. Some time ago, I shared Duan Yongping's self-answered question, "What can I buy after selling Moutai?" Today, seeing this Sequoia Capital partner's regret about Nvidia, I'm even more inclined to this approach now. Following this line of thought, we can also look at Sean's sale of Nvidia from another perspective: If he sold Nvidia because he found a better investment target, I believe that regardless of the consequences, his methods and strategies were sound. The problem was simply that his understanding at the time was "insufficient," or rather, he failed to correctly predict the future. However, missing an investment opportunity due to insufficient understanding isn't a problem, because no one (everyone) can earn money beyond their understanding. This is normal, and there's nothing to regret. Missing an investment opportunity due to failing to correctly predict the future is even less of a problem, because no one can predict the future, especially not at that specific point in time the emergence of disruptive technologies like AI and the resulting explosive demand for graphics cards. However, if he sold his Nvidia shares purely because he felt the stock price was too high, then there's room for reflection and discussion. He could consider some questions: For example, how high does a company's stock price actually need to be to be considered "high"? And what should be done with the cash obtained after selling a company's stock? Should he wait for it to fall before buying it back? If it doesn't fall, and he can never buy it back, is that acceptable? Actually, I have a very simple perspective: if you sell too early, you sell too early; don't regret it. Everyone has experienced selling too early. The most important thing in the investment market is that you must always be in the market. "Where there's life, there's hope." As long as you're alive, investment opportunities will always exist; always look forward.
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