To get a sense of who is truly in control of NVIDIA Corporation (NASDAQ:NVDA), it is important to understand the ownership structure of the business. With 65% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
As a result, institutional investors endured the highest losses last week after market cap fell by US$15b. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 50% for shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the downtrend continues, institutions may face pressures to sell NVIDIA, which might have negative implications on individual investors.
In the chart below, we zoom in on the different ownership groups of NVIDIA.
NasdaqGS:NVDA Ownership Breakdown December 31st 2022
What Does The Institutional Ownership Tell Us About NVIDIA?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
As you can see, institutional investors have a fair amount of stake in NVIDIA. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at NVIDIA's earnings history below. Of course, the future is what really matters.
NasdaqGS:NVDA Earnings and Revenue Growth December 31st 2022
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in NVIDIA. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 8.3% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.2% and 5.5% of the stock. In addition, we found that Jen-Hsun Huang, the CEO has 3.5% of the shares allocated to their name.
A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of NVIDIA
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
We can see that insiders own shares in NVIDIA Corporation. It is a very large company, and board members collectively own US$15b worth of shares (at current prices). Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
The general public-- including retail investors -- own 31% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand NVIDIA better, we need to consider many other factors. For example, we've discovered 3 warning signs for NVIDIA that you should be aware of before investing here.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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