Forget Nvidia: Billionaires Are Selling it and Buying This Top Artificial Intelligence (AI) Competitor Instead - Latest Global News

Forget Nvidia: Billionaires Are Selling it and Buying This Top Artificial Intelligence (AI) Competitor Instead

Over the past 30 years, Wall Street and investors have seen plenty of new, big investment trends come and go. But no high-growth trend has come anywhere close to what the advent of the Internet has done for the American economy—at least until now.

According to analysts at PwC, artificial intelligence (AI) will contribute $15.7 trillion to the global economy by 2030 through a combination of consumption-side effects and manufacturing improvements.

AI uses software and systems instead of humans. What makes AI such a groundbreaking technology is the ability of these systems to “learn” over time without human intervention. In theory, this should result in AI-driven software and systems becoming increasingly better at their tasks over time, and allow these systems to potentially learn new tasks.

At the forefront of the artificial intelligence revolution is none other than NVIDIA (NASDAQ: NVDA)whose stock value has increased by more than $2.6 trillion since the beginning of 2023.

A professional asset manager uses a pen and a smartphone to analyze a stock chart displayed on a computer monitor.

Image source: Getty Images.

Although Nvidia has made some of Wall Street’s smartest investors richer, not all billionaires are sold on the AI ​​boss. Based on the latest round of Form 13F filings with the Securities and Exchange Commission – a 13F gives investors a glimpse into top money managers’ purchases and sales over the last quarter – billionaires have been active sellers of Nvidia stock. But at the same time, they couldn’t stop buying shares of one of its main competitors in the AI ​​space.

Eight billionaire asset managers have dumped Nvidia

On paper, Nvidia can do no wrong. The company’s graphics processing units (GPUs) account for around 90% of the AI ​​GPUs currently deployed in the high-performance data centers that monitor generative AI solutions and train large language models (LLMs). Nvidia’s chips are in such demand that some analysts believe its recently unveiled Blackwell chip will be fully booked well into 2025.

Despite these first-mover advantages in the hottest trend since the advent of the Internet, eight billionaire asset managers decided to put at least some of their Nvidia shares on the market in the quarter ended March. These include (number of shares sold in parentheses):

  • Philippe Laffont of Coatue Management (2,937,060 shares)

  • Ken Griffin of Citadel Advisors (2,462,716 shares)

  • Israel Englander of Millennium Management (720,004 shares)

  • Stanley Druckenmiller of the Duquesne Family Office (441,551 shares)

  • David Siegel and John Overdeck of Two Sigma Investments (420,801 shares)

  • David Tepper of Appaloosa Management (348,000 shares)

  • Steven Cohen of Point72 Asset Management (304,505 shares)

Technically, there were nine billionaire sellers, but I left out Jim Simons of Renaissance Technologies after his death last month.

One of the reasons eight of Wall Street’s biggest money managers have decided to sell could simply be profit-taking. The company’s shares have gained more than 700% since the start of 2023, and we’ve never seen a megacap stock rise as much as Nvidia over the past year and beyond. Taking profits is never a bad idea, especially in an election year.

But perhaps an even more compelling reason why billionaires have retreated is history. While history on Wall Street rarely repeats itself exactly, it often rhymes.

For example, every major innovation of the past three decades has found its way through an early-stage bubble. That is, investors have consistently overestimated the adoption and acceptance of new technologies and innovations. Even though artificial intelligence is currently all the rage on Wall Street, there is a good chance that the technology will need time to mature. In short, an AI bubble bursting event could be coming.

In addition, Nvidia’s price-to-sales ratio over the last 12 months is almost identical to that of the market leaders at the time. Cisco systems And Amazon before the dotcom bubble burst.

The final piece of the puzzle that may have prompted these eight billionaires to reduce their stakes in Nvidia is growing competition. While most investors are aware of the outside competitors that will be bringing AI chips to market, they may have overlooked the fact that Nvidia’s four largest customers, representing about 40% of net revenue, are developing their own AI GPUs. This suggests that we are likely seeing a peak in orders and gross margin for this AI titan.

A person wearing gloves and a full-body jumpsuit examines a microchip held in his hands.A person wearing gloves and a full-body jumpsuit examines a microchip held in his hands.

Image source: Getty Images.

Billionaires invest in a key AI competitor to Nvidia

But here’s where it gets interesting. While more than half a dozen of the smartest and most successful money managers are dumping Nvidia stock, six billionaire investors (four of whom sold Nvidia stock) pounced on one of its biggest competitors in the artificial intelligence space. I’m talking about the semiconductor giant Intel (NASDAQ:INTC).

It’s no secret that Intel is facing challenges it must overcome. Weaker sales of personal computers (PCs) in the wake of the COVID-19 pandemic have slowed demand for the company’s central processing units (CPUs). Intel is also battling a resurgence modern micro deviceswhich (pardon the overly perfect pun) is busily reducing its CPU share in PCs and traditional data centers.

Despite these headwinds, we learned that half a dozen billionaires bought a ton of Intel stock in the first quarter, including (number of shares purchased in parentheses):

  • Jeff Yass of Susquehanna International (4,836,516 shares)

  • Ken Griffin of Citadel Advisors (1,757,626 shares)

  • David Siegel and John Overdeck of Two Sigma Investments (1,345,269 shares)

  • Israel Englander of Millennium Management (413,507 shares)

  • Ray Dalio of Bridgewater Associates (411,473 shares)

The obvious reason billionaires are excited about Intel’s future is the opportunity to capitalize on the exceptionally high demand for AI GPUs. Recently, Intel unveiled its Gaudi 3 AI accelerator chip, which will be a direct competitor to Nvidia’s H100 GPU in data centers focused on training LLMs and running generative AI solutions. With demand for AI GPUs outstripping supply, Gaudi 3 is likely to be purchased by companies looking to capitalize on the rise of AI. A general launch of Gaudi 3 is expected in the third quarter.

Another catalyst that could entice billionaire asset managers to take the proverbial plunge into Intel stock is the company’s Foundry Services division.

Currently, it is costing Intel a fortune to build its chip manufacturing business from scratch to mass production. But with two plants under construction in Ohio and another due to come online in Germany later this decade, the foundation is in place for Intel to become the world’s second-largest chip foundry by the end of the decade. In other words, earnings per share (EPS) have probably bottomed out and should improve significantly in the second half of the decade.

Finally, it’s important to recognize that Intel’s legacy CPU segments are still nothing short of cash cows. Even with modest market share losses in PCs and data centers to AMD, Intel’s share is still dominant — and that’s not likely to change anytime soon. Predictable operating cash flow from CPU sales in PCs, mobile, and traditional centers allows Intel to redirect money to higher-growth initiatives, including AI and its Foundry Services segment.

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John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Sean Williams holds positions in Amazon and Intel. The Motley Fool holds positions in and recommends Advanced Micro Devices, Amazon, Cisco Systems, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.

Forget Nvidia: Billionaires are selling it and buying this top artificial intelligence (AI) competitor instead. Originally published by The Motley Fool

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