Select billionaire money managers have sizably reduced their stakes in Nvidia and chosen to build their positions in four standout artificial intelligence (AI) stocks.
With all eyes on the Federal Reserve and earnings season, it’s possible investors missed what was, arguably, the most-important data release of the quarter five weeks ago.
On May 15, institutions with at least $100 million in assets under management filed Form 13F with the Securities and Exchange Commission. A 13F provides a snapshot to investors of what Wall Street’s smartest and most-successful investors have been buying and selling. It’s effectively a blueprint that allows investors to see what stocks, industries, and trends have been piquing the interest of top-tier money managers.
As should be no surprise, first-quarter 13Fs showed a lot of trading activity in artificial intelligence (AI) stocks.
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Companies involved in AI are using software and systems to handle tasks that would normally be overseen by humans. What gives AI such broad-reaching utility is the ability for software and AI-driven systems to learn without human intervention. This evolution of AI systems should improve efficiency and allow for new tasks to be learned.
Despite the big-dollar potential associated with AI — the analysts at PwC foresee AI adding close to $16 trillion to the global economy by 2030 — Wall Street’s billionaire investors have mixed views about the companies embracing this technology.
Based on the latest round of 13Fs, which covers trading activity during the March-ended quarter, a number of prominent billionaires were active sellers of AI kingpin Nvidia (NVDA 3.51%). At the same time, these very same billionaire money managers were buying shares of four other promising artificial intelligence stocks.
Top-notch billionaire money managers dumped shares of Nvidia
Since the start of 2023, shares of Nvidia have skyrocketed by 802%, as of the closing bell on June 14, which translates into nearly $2.9 trillion in added market value. This helps to explain why it was a no-brainer for the company’s board to approve a 10-for-1 stock split, which was completed on June 7.
Nvidia’s outperformance has everything to do with its graphics processing units (GPUs) dominating in high-compute data centers. According to semiconductor analysis firm TechInsights, Nvidia was responsible for 3.76 million of the 3.85 million AI-GPUs shipped last year.
Furthermore, demand for Nvidia’s AI-accelerated chips has completely overwhelmed supply. This has sent the selling price of Nvidia’s GPUs skyward and meaningfully increased its adjusted gross margin.
But in spite of Nvidia’s first-mover advantages, two prominent billionaires dumped more than 2 million shares of the company during the first quarter (total shares sold in parenthesis):
- Philippe Laffont of Coatue Management (2,937,060 shares)
- Ken Griffin of Citadel Advisors (2,462,716 shares)
While simple profit-taking might explain some of this selling activity, there may be other catalysts behind Laffont’s and Griffin’s decision to decisively reduce their respective stakes in Nvidia.
As I’ve pointed out numerous times before, history has not been kind to next-big-thing innovations over the last 30 years. Not one game-changing innovation has avoided a bubble-bursting event. Investors commonly overestimate how quickly a new technology or innovation will become mainstream, and they’re likely doing it again with artificial intelligence. Since no company has benefited more directly from AI, Nvidia would probably be the hardest hit if the AI bubble bursts.
It’s also going to be increasingly difficult for Nvidia to sustain its growth trajectory and adjusted gross margin with competition coming at it from all angles. Since it can’t meet all of its orders, external competitors like Advanced Micro Devices and Intel can be market share winners by default.
To add to this point, Nvidia’s top customers are all working on AI-GPUs of their own. Even if these chips are simply to complement Nvidia’s prized H100 GPU, it signals a purposeful lessening of reliance on the company’s data center GPU architecture over time.
Image source: Getty Images.
Billionaire Philippe Laffont piled into AI networking and cloud companies
But while Philippe Laffont was reducing Coatue’s stake in Nvidia by 68% during the first quarter, he and his team were simultaneously gobbling up shares of AI networking solutions company Broadcom (AVGO -1.44%), as well as cloud-based customer relationship management (CRM) software provider Salesforce (CRM 0.58%). Coatue purchased 416,460 shares of Broadcom and 2,556,774 shares of Salesforce.
Broadcom, which announced a 10-for-1 forward-stock split of its own last week, is a rising star in AI-accelerated networking solutions. The company’s Jericho 3 chip has the ability to connect up to 32,000 GPUs, which can optimize processing speeds and reduce tail latency. In plainer English, Broadcom’s AI solutions are expediting the processing needs of enterprise data centers responsible for training large language models (LLMs) and running generative AI solutions.
But Broadcom has plenty of momentum outside of the AI arena, too. It’s still a dominant player in next-generation wireless chips and accessories used in smartphones, and also provides an assortment of connectivity solutions and sensors for industrial equipment and new vehicles. The company’s backlog and cash-flow consistency are tough to top in the tech sector.
Meanwhile, Salesforce is harnessing the power of AI to personalize its marketing efforts, automate certain repetitive tasks (e.g., data entry), and help it target new customers to boost its own sales. CRM software is, after all, designed to enhance existing customer relationships and grow sales. Predicting which existing clients might purchase a new product or service can be improved with AI.
There’s little doubt Salesforce’s long-term success has to do with its dominance in the CRM space. A recent report from IDC found that Salesforce accounted for a whopping 21.7% of global cloud-based CRM spending in 2023. With over three times the market share of its next-closest competitor (Microsoft at 5.9%), it should have no trouble retaining this competitive edge for many years to come.
Billionaire Ken Griffin chose something a little more “Magnificent”
Since its inception in 1990, Ken Griffin’s hedge fund has generated $74 billion in total gains. No other hedge fund has come close to matching this mark. That’s what makes Citadel selling roughly 2.46 million shares of Nvidia all the more interesting — as well as Griffin and his teams’ decision to buy two AI-inspired “Magnificent Seven” stocks.
During the March-ended quarter, Citadel Advisors added 352,453 shares of e-commerce titan Amazon (AMZN -0.68%), as well as 747,887 shares of tech stock Apple (AAPL -1.10%).
In addition to designing its own AI chips, Amazon is aggressively deploying generative AI solutions across its various operating segments. For instance, it’s made generative AI solutions available to its Amazon Web Services (AWS) customers, who are able to use the technology to do everything from customize AI virtual assistants to train LLMs. AWS is one of Amazon’s fastest-growing segments, and is often responsible for the lion’s share of its operating income.
Don’t overlook subscription services or advertising, either. Amazon attracts in the neighborhood of 2.5 billion visitors to its site each month, which yields quite a bit of ad revenue. Meanwhile, the company surpassed 200 million global Prime subscribers in April 2021 and has more than likely added to this total since becoming the exclusive streaming partner of Thursday Night Football.
As for Apple, it made waves during its 2024 developer conference when it introduced “Apple Intelligence” — the company’s collective term for a series of AI-inspired upgrades to its various products and services. This includes everything from emoji generation based on entered text to the integration of OpenAI’s virtual chatbot ChatGPT-4o later this year.
More so than any of the companies mentioned here, Apple brings cash-flow predictability to the table. It has an extremely loyal customer base, a well-known brand, and has often led with innovation. Apple has also repurchased $674 billion worth of its common stock since 2013 began, which is more than any other public company. These buybacks have undoubtedly helped to increase its earnings per share and made the company more attractive to fundamentally focused investors.
Eugen Boglaru is an AI aficionado covering the fascinating and rapidly advancing field of Artificial Intelligence. From machine learning breakthroughs to ethical considerations, Eugen provides readers with a deep dive into the world of AI, demystifying complex concepts and exploring the transformative impact of intelligent technologies.
