Select billionaire money managers have significantly reduced their stakes in Nvidia and opted to build their positions in four standout artificial intelligence (AI) stocks.
With all eyes on the Federal Reserve and earnings season, it's possible that investors missed the most important quarterly data release from 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 gives investors a snapshot of the buying and selling of Wall Street's smartest and most successful investors. It's effectively a blueprint that allows investors to see which stocks, industries and trends are piqued the interest of top-tier money managers.
As should come as no surprise, first-quarter 13Fs showed a lot of trading activity in artificial intelligence (AI) stocks.
Image source: Getty Images.
Companies involved in AI are using software and systems to handle tasks that are normally overseen by humans. What gives AI such widespread utility is the ability for software and AI-powered systems to learn without human intervention. This evolution of AI systems should improve performance and allow new tasks to be learned.
Despite the big-dollar potential associated with AI — PwC analysts estimate AI will add nearly $16 trillion to the global economy by 2030 — billionaire Wall Street investors are wary of companies adopting the technology. I have mixed thoughts.
Based on the latest round of 13Fs, which cover trading activity during the quarter ended in March, several prominent billionaires were active sellers of AI Kingpin. Nvidia (NVDA 3.51%). At the same time, this same billionaire money manager was buying shares of four other promising artificial intelligence stocks.
Top billionaire money managers dumped Nvidia shares.
Since the start of 2023, Nvidia shares are up 802%, as of the June 14 closing bell, which translates to about $2.9 trillion in additional market value. This helps explain why the company's board was reluctant to approve the 10-for-1 stock split, which was completed on June 7.
Nvidia's superior performance has everything to do with its graphics processing units (GPUs) that dominate 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.
Additionally, demand for Nvidia's AI-accelerated chips has completely overwhelmed supply. This has sent the selling price of Nvidia's GPUs skyrocketing and meaningfully increased its adjusted gross margins.
But despite Nvidia's early gains, two prominent billionaires sold more than 2 million shares of the company during the first quarter (total shares sold in parentheses):
- Philippe Lafont of Coteau Management (2,937,060 shares);
- Ken Griffin of Citadel Advisors (2,462,716 shares);
While simple profit-taking may 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 the next big innovation over the past 30 years. Not a single game-changing innovation avoided the bubble-bursting event. Investors often overestimate how quickly a new technology or innovation will become mainstream, and they're doing it again with artificial intelligence. Since no company has directly benefited much from AI, Nvidia will suffer the most if the AI bubble bursts.
It is also becoming increasingly difficult for Nvidia to maintain its growth momentum and adjust gross margins with competition from all angles. Since it cannot fulfill all its orders, foreign competitors are preferred. Advanced Micro Devices And Intel By default, market share can be a winner.
To add to that point, Nvidia's top customers are all working on their own AI-GPUs. Even if these chips are only meant to complement Nvidia's pricey H100 GPU, it signals the company's purposeful reliance on 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 in the AI networking solutions company. Broadcom (AVGO -1.44%)Also a cloud-based customer relationship management (CRM) software provider Sales force (CRM 0.58%). Coatue bought 416,460 shares of Broadcom and 2,556,774 shares of Salesforce.
Broadcom, which announced a 1-for-1 forward stock split 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 improve processing speed and reduce tail latency. In plain English, Broadcom's AI solutions are accelerating 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 the AI arena as well. It is 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 difficult to top in the tech sector.
Meanwhile, Salesforce is harnessing the power of AI to personalize its marketing efforts, automate certain repetitive tasks (eg, data entry) and acquire new customers to grow its own sales. Helping to target. CRM software, after all, is designed to enhance existing customer relationships and increase sales. Predicting which existing clients might buy a new product or service can be improved with AI.
There is no doubt that Salesforce's long-term success is tied to its dominance in the CRM space. A recent IDC report found that Salesforce accounted for 21.7% of global cloud-based CRM spending in 2023. Its next closest competitor (Microsoft at 5.9%), it should have no problem maintaining this competitive edge for many years to come.
Billionaire Ken Griffin opted for something more “spectacular.”
Since its inception in 1990, Ken Griffin's hedge fund has generated a total of $74 billion. No other hedge fund matches that mark. That's what makes Citadel Nvidia's sale of about 2.46 million shares all the more interesting — as well as Griffin and his teams' decision to buy two AI-inspired “Magnificent Seven” stocks.
Citadel Advisors acquired 352,453 shares of the e-commerce titan's stock during the quarter ended in March. Amazon (AMZN -0.68%)plus 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 example, it has made generative AI solutions available to its Amazon Web Services (AWS) customers, using the technology to do everything from custom AI virtual assistants to training LLMs. are able to. AWS is one of Amazon's fastest-growing segments, and often accounts for the bulk of its operating revenue.
Don't ignore subscription services or ads either. Amazon attracts 2.5 billion visitors to its site each month, generating substantial revenue from advertising. Meanwhile, the company surpassed 200 million global Prime subscribers in April 2021 and has grown that total even further since becoming its exclusive streaming partner. 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 than any of the companies mentioned here, Apple brings cash flow forecasting to the table. It has an extremely loyal customer base, a well-known brand, and often leads with innovation. Apple has repurchased $674 billion of its common stock since the start of 2013, more than any other public company. These buybacks have undoubtedly helped boost its earnings per share and made the company more attractive to primarily focused investors.