'Dean of Valuation' Aswath Damodaran cashed in his Nvidia stake after the chipmaker's scorching stock rally

• Aswath Damodaran dumped his Nvidia stake because he couldn't justify holding it as a value investor.
• "The run up has been just so astonishing that I cannot in good conscience hold on to it," he told CNBC.

Aswath Damodaran has sold his stake in chipmaker Nvidia after its blistering rally to a $1 trillion valuation because of his commitment to value investing.

Damodaran is a NYU finance professor dubbed the 'Dean of Valuation' for his focus on estimating the value of assets. He told CNBC that as someone who specializes in spotting stocks that trade below their intrinsic value, he couldn't justify keeping hold of Nvidia.

"The run up has been just so astonishing that I cannot in good conscience hold on to it and call myself a value investor," the Stern School of Business professor told the network.

Nvidia stock has soared by about 170% this year, making it the best performer in the S&P 500. It touched a $1 trillion valuation for the first time this week as part of the AI-fueled stock surge. While the chipmaker saw its biggest one-day fall in four months on Wednesday, it gained 5% on Thursday.

"I finally got it out of my portfolio because I couldn't take the rise. You had $300 billion in a week. You're pushing the absolute limit of what sustainable value is," Damodaran told Barrons on Tuesday.

Nvidia is primarily a hardware company, and selling microchips to other businesses means it will naturally face hurdles, he added.

In contrast, other members of the exclusive $1 trillion-market-cap club like Apple, Alphabet, Amazon, and Microsoft have a wider range of offerings and several ways to make money, he said.

"The tails in the distribution tend to be much more prudent. The upside is not as large as it could potentially be for a consumer-based company with an ecosystem of billions of users. And that kind of crimps how much you're willing to bet on that optionality," he told Barrons.

Still, the finance professor said he loves Nvidia and sees it as an "amazing" company.

"It seems to find every opportunity in the market, and find a way to cater to it, whether it's crypto, whether it's gaming — and now with AI. It almost always seems to be the first in line to be able to take advantage of it and that can't be accidental," he told CNBC.