Over the past three decades, Wall Street has seen no shortage of major investment trends. Since the advent of the Internet in the mid-1990s, no innovation, technology, or trend has had as much impact on business growth rates as the Internet… until now.
According to PwC analysts, the artificial intelligence (AI) The revolution has the potential to increase global gross domestic product by more than $15 trillion by 2030. It is a mammoth an addressable market that can support multiple big winners.
Yet despite the euphoria surrounding AI on Wall Street, quarterly 13F filings with the Securities and Exchange Commission suggest mixed feelings about AI-inspired stocks. A 13F provides investors with a concise snapshot of the stocks that the smartest and most successful money managers have been buying and selling.
Billionaire investors sent shares of the AI leader to the United States in the quarter ended June Nvidia (NASDAQ: NVDA) on the chopping block and firmly entrenched in what may be considered their new favorite AI stock.
Nvidia saw billionaires running for the exits for a third straight quarter
What’s particularly interesting about Nvidia’s sales activity is that it marks the third consecutive quarter of sales by at least half a dozen top billionairesDuring the quarter ended June, seven billionaire investors lightened their load, including (total shares sold in parentheses):
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Ken Griffin of Citadel Advisors (9,282,018 shares)
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David Tepper of Appaloosa (3,730,000 shares)
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Stanley Druckenmiller of Duquesne Family Office (1,545,370 shares)
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Cliff Asness of AQR Capital Management (1,360,215 shares)
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Israel Englander of Millennium Management (676,242 shares)
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Steven Cohen of Point72 Asset Management (409,042 shares)
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Philippe Laffont of Coatue Management (96,963 shares)
Profit-taking and the need to diversify are two possible answers to why some or all of these billionaires felt the need to reduce their stakes in Nvidia.
Since the beginning of 2023, Nvidia’s market cap has increased by $2.75 trillion, as of the close of trading on August 23, 2024, leading to the company’s largest-ever stock split (10-for-1) in June. The increase is due to the company’s H100 graphics processing unit (GPU) becoming the standard in AI-accelerated data centers, as well as Nvidia’s staggering pricing power, reflecting overwhelming enterprise demand for its AI GPUs.
But there are many reasons beyond simple profit-taking that could explain this continued exodus of billionaires from Nvidia.
One of the most logical conclusions to draw is that at least some of these billionaires are worried about the competitive pressures that follow their parabolic rise. Advanced Micro Devices (NASDAQ: AMD) AMD is ramping up production of its MI300X AI GPU and doesn’t have the same chipmaking supply constraints that Nvidia does. Additionally, AMD’s chip typically sells for $10,000 to $15,000, which is well below the $30,000 to $40,000 that Nvidia is asking for the H100.
Competitive pressures can also come from within. Nvidia’s four largest customers by net sales — Microsoft, Meta-platforms, AmazonAnd Alphabet — have developed in-house AI GPUs for use in their data centers. While these in-house chips won’t have the same computing power as Nvidia’s H100, they will take up valuable data center space and minimize Nvidia’s future opportunities.
These seven billionaire salespeople may also be concerned about history. At no point in the last three decades has any innovation, technology, or trend managed to avoid a speculative bubble bursting. Without exception, investors always overestimate the usefulness and adoption of new innovations.
Despite all the buzz around AI, very few companies have clearly defined how they will generate a positive ROI from their data center. This is a glaring warning: investors have, once again, overestimated the adoption of this technology. If the AI bubble bursts, no company will likely be hit harder than Nvidia.
Nvidia is now the favorite AI stock of billionaire fund managers
But while billionaires were selling Nvidia shares out the door, they were eagerly buying shares of what can arguably be described as their new favorite AI stock. In total, seven billionaire fund managers bought shares of the AI networking solutions specialist. Broadcom (NASDAQ: AVGO) during the second quarter, including (total shares purchased in parentheses):
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Ole Andreas Halvorsen of Viking Global Investors (2,930,970 shares)
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Jeff Yass of Susquehanna International (2,347,500 shares)
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Israel Englander of Millenium Management (2,096,440 shares)
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Ken Griffin of Citadel Advisors (1,880,740 shares)
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John Overdeck and David Siegel of Two Sigma Investments (1,332,230 shares)
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Ken Fisher of Fisher Asset Management (865,090 shares)
Keep in mind that the share count above has been adjusted for Broadcom’s 10-for-1 stock split that occurred after the close of trading on July 12.
Just as Nvidia’s hardware has become a staple of compute-heavy data centers, Broadcom has quickly asserted its dominance as a key provider of AI networking solutions. For example, its Jericho3-AI fabric is capable of connecting up to 32,000 GPUs, with the goal of reducing tail latency and maximizing the compute capacity of these chips.
While AI has undoubtedly been a catalyst, I think the reason billionaires have made Broadcom their favorite AI stock is that, unlike Nvidia, the company isn’t entirely reliant on AI for growth. If the AI bubble bursts, Broadcom has a plethora of other revenue streams it can turn to for protection.
For example, Broadcom holds a leading position as a supplier of wireless chips and accessories used in next-generation smartphones. Mobile companies have voluntarily spent billions to upgrade their networks to support 5G download speeds. This has led to a constant device replacement cycle that has driven demand for Broadcom’s products.
Beyond smartphones, Broadcom provides networking solutions to businesses across all sectors and industries, as well as cybersecurity solutions and financial software, to name a few of its other businesses.
Broadcom has also used acquisitions to expand its ecosystem of products and services, promote cross-selling opportunities and grow its bottom line. The $69 billion acquisition of cloud virtualization software provider VMware, which closed in November, is a prime example of Broadcom’s expanding reach into enterprise private and hybrid clouds.
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Randi Zuckerberg, former head of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Sean Williams has positions in Alphabet, Amazon, and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a position in Alphabet, Amazon, and Meta Platforms. disclosure policy.
Make Way for Nvidia: Billionaires Have a New Favorite Artificial Intelligence (AI) Stock was originally published by The Motley Fool
