Goldman Sachs spots Nvidia-linked shift not seen in 13 years

Smart money is getting a lot more cautious on the stock market’s finest.

According to TipRanks, Goldman Sachs said that hedge funds sold off stocks in March at the fastest pace in 13 years, a rare shift pointing to growing anxiety across markets.

The change hit high-profile names, including Nvidia (NVDA), Tesla (TSLA), and Palantir (PLTR), as fund managers pulled back on risk and prepared for more turbulence.

This level of selling represents a clear red flag.

Naturally, when hedge funds pull back so emphatically, it underscores a significant concern that markets face tremendous downside risk. 

At this point, that caution is driven by elevated oil prices, geopolitical hiccups, and a shaky investor sentiment. 

For context, the S&P 500, according to Yahoo Finance, is down about 4% year-to-date at last check.

Simultaneously, fund managers are shifting away from growth stocks toward safer plays like Walmart (WMT) and Costco (COST), with a greater focus on stability over returns.

Wall Street price targets for Nvidia stock

• Wall Street’s average price target for Nvidia is $268.22, implying 51.2% upside, with analyst targets ranging from $140 on the low end to $380 on the high end.
• Bank of America: $300 (+70.7% vs. current price).
• Barclays: $275 (+56.5% vs. current price).
• Goldman Sachs: $250 (+42.2% vs. current price).
• JPMorgan: $265 (+50.8% vs. current price).
• Morgan Stanley: $260 (+47.9% vs. current price).
• UBS: $245 (+39.4% vs. current price).

What hedge funds are really saying

Goldman Sach’s data suggests that the market is entering a remarkably tough phase, where it’s a lot more important to protect capital than chase upside, as leadership starts to rotate away from the big names. 

• This is a bigger market message: When hedge funds cut their exposure to sectors like tech, financials, and industrials at once, it underscores a growing concern about the broader economic backdrop. 
• Defensive stocks are gaining importance: The move into defensive sectors, like Walmart and Costco, suggests that investors are hunting for greater stability. These businesses tend to offer steady demand, predictable earnings, and a lot less sensitivity to market swings.
• Investors may need a different playbook: Naturally, in what has become a more defensive market, stock selection matters a ton, and downside risk gets tons more attention, and safer names start outperforming.

Costco and Walmart returns support defensive rotation into consumer staples

Costco and Walmart’s recent stock market performance somewhat supports Goldman Sachs’ view that hedge funds are defensively rotating into consumer staples. 

Related: UBS has surprising message for gold investors after recent weakness

The two are the clearest bellwethers in the niche, and have held up relatively well over most medium- and longer-term periods. 

Walmart, in particular, has done remarkably well while Costco has also posted superb gains across multiple key windows.

• Over the last 1 month, Costco returned 1.22%, while Walmart returned -0.83%.
• Over the last 3 months, Costco returned 18.94%, while Walmart returned 11.78%.
• Over the last 6 months, Costco returned 11.02%, while Walmart returned 24.19%.
• Over the last 9 months, Costco returned 3.75%, while Walmart returned 29.70%.
• Year to date, Costco returned 17.86%, while Walmart returned 13.14%.
• Over the last 1 year, Costco returned 5.74%, while Walmart returned 41.38%.
  Source: Seeking Alpha.

Investor takeaway on Nvidia stock

Nvidia still trades at a premium, but it no longer looks like a stock that’s blindly expensive. 

As per Seeking Alpha, on the valuation end, Nvidia’s forward non-GAAP P/E sits at 21.39 times, now in line with the sector median of 21.76.

Moreover, its forward GAAP P/E is  at 21.80 times, which has fallen behind the sector median of 28.77. At the same time, the PEG ratios, at 0.54 and 0.56, show that investors aren’t paying an outrageous sum relative to the company’s incredible growth numbers. 

However, on a revenue basis, Nvidia stock looks a lot more expensive.

For instance, its forward price-to-sales ratio is 11.67 compared to the sector median of 2.93, so Wall Street is still assigning Nvidia a huge quality premium. That obviously leaves less room for any missteps for the AI bellwether. 

More Nvidia:

• Goldman Sachs sends blunt message on Nvidia stock after GTC
• Nvidia CEO makes bombshell call on AI’s next big thing
• Bank of America resets Nvidia stock forecast after meeting with CFO

Furthermore, Nvidia’s technical setup adds another wrinkle.

The stock trades at around $177.40, putting it 2.32% above its 10-day moving average of 173.37 (an encouraging short-term bounce).

However, the stock still trades comfortably below the 50-day (182.65), 100-day (183.39), and 200-day (179.82) averages.

So, even though momentum has improved, the broader trend has not fully turned.

That sets up a clear game plan. 

Long-term investors will want to buy Nvidia stock selectively, but shorter-term traders will want to see Nvidia reclaim the $180 to $183 mark before treating it as a clear breakout.

Nvidia stock returns vs the Roundhill Magnificent Seven ETF (MAGS) (proxy for Magnificent 7)

• Over the last 1 week, Nvidia stock returned 3.59% versus 2.17% for the MAGS ETF.
• Over the last 1 month, Nvidia stock returned -2.79% versus -5.42% for the MAGS ETF.
• Over the last 6 months, Nvidia stock returned -6.09% versus -10.34% for the MAGS ETF.
• Year to date, Nvidia stock returned -4.88% versus -11.66% for the MAGS ETF.
• Over the last 1 year, Nvidia stock returned 60.65% versus 23.51% for the MAGS ETF.
  Source: Seeking Alpha.

Related: Goldman Sachs has a message on Nvidia stock for investors