Position size is more important than ever as Nvidia stock continues to shake out investors despite reporting a solid beat on earnings late Wednesday.
The leading supplier of processors made for generative AI technologies topped expectations on earrings per share and revenue, particularly as this quarter's results now reflect sales of its new Blackwell processor.
But Nvidia stock faces some stiff headwinds. The launch of China's DeepSeek generative AI model led investors in Nvidia's top customers to scrutinize heavy capital expenditures on compute power. DeepSeek is reportedly competitive with other modern generative AI technologies, but requires fewer, less advanced resources in its development.
Competitors are also readying their own generative AI chips, while export controls are restricting sales to key markets like China. Nvidia, meanwhile, is also seeing speed bumps in producing next generation chips at scale.
Managing Nvidia Stock Risks With Position Sizing
To manage these risks, "I go with smaller positions," Vibha Jha said to Investor's Business Daily's "Investing with IBD" podcast. Jha is a trader and top four-time performer in the United States Investing Championship. Because she says she doesn't watch the market every day, she manages her risk by using smaller positions.
"Does that mean because I'm not concentrated (in a position), I'm leaving money on the table? Of course," she said. "But at the same time, I could sit through Nvidia's drawdowns because I let it pull back because I'm prepared."
Audio Version Of Podcast
Considering the position sizing and timing of when to buy into Nvidia stock gives investors some flexibility to let things come down. "When you buy right, you can sit through pullbacks. You can sit through drawdowns," she said. "You've already captured your gains." Jha said she bought Nvidia stock in 2016 but has sold most of it by now, gaining through the returns.
Greed Doesn't Pay In Volatile Trades
Sometimes, the winning move is to be disciplined enough to move to cash. "Cash is a position," Jha said. "I don't believe in chasing things."
When navigating a tighter market with more whipsaws, Jha says it's OK to not be as greedy. She points to her experience trading TQQQ, a leveraged ETF that can be volatile and risky. "Yes, you're going to leave stuff," Jha said. "But I never get in at the bottom and I never get out at the top."
"When you have a good game, take something off the table," Jha said.
Follow Mike Juang on X at @mikejuangnews and on Threads at @namedvillage.
