Billionaires are selling Nvidia stock, buying two supercharged artificial intelligence (AI) stocks instead
Many investors see Nvidia (NASDAQ: NVDA) as the quintessential artificial intelligence (AI) stock because its chips provide the computing power needed to train the most advanced AI systems, such as OpenAI’s ChatGPT and You’re hereFully autonomous driving software.
However, some hedge fund billionaires sold Nvidia shares during the first quarter, while buying shares of Palantir Technologies (NYSE: PLTR) and or Super microcomputer (NASDAQ: SMCI)two supercharged AI stocks with year-to-date returns of 59% and 198%, respectively.
Moore Capital Management’s Louis Bacon sold 2,006 shares of Nvidia in the first quarter, reducing his stake by 19%. Meanwhile, Bacon opened a small position in Super Micro Computer.
Millennium Management’s Israel Englander sold 720,000 shares of Nvidia in the first quarter, reducing his stake by 35%. Meanwhile, Englander increased his positions in Palantir and Super Micro Computer by 4% and 235%, respectively.
Coatue Management’s Philippe Laffont sold 2.9 million shares of Nvidia in the first quarter, reducing his stake by 68%. Meanwhile, Laffont increased his position in Palantir by 40%.
The trades made by Israel Englander are particularly notable because Millennium Management easily beat S&P 500 Over the past three years, it ranks as the second-best performing hedge fund of all time in terms of net gains since inception. Here’s what investors need to know about Palantir and Supermicro.
1. Palantir Technologies
Palantir specializes in data analytics. Its software enables government and commercial customers to integrate data, develop artificial intelligence (AI) and machine learning (ML) models, and build applications that leverage these datasets and models to improve decision making. Palantir recently introduced its Artificial Intelligence Platform (AIP), a product that supports large language models and Generative AI to its existing software.
Some industry analysts have praised the company for its technological prowess. Forrester Research ranked Palantir Foundry as the best AI/ML platform in a report published in July 2022. And Dresner Advisory Services ranked Palantir as a leader in the AI/ML and data science market in a report published in August 2023.
Other analysts, however, are skeptical. RBC Capital’s Rishi Jaluria says conversations with industry observers and company employees have led to the conclusion that Palantir offers “nothing truly differentiated in generative AI.”
Palantir reported relatively strong financial results for the first quarter, beating revenue estimates and meeting net income expectations. Its customer count increased 42% to 554, and the average existing customer spent 11% more. On the other hand, revenue rose 21% to $634 million, the third consecutive sequential acceleration, and non-GAAP earnings rose 60% to $0.08 per diluted share.
CFO Dave Glazer said the commercial segment benefited from “unprecedented demand driven by AIP momentum.” However, the stock still fell 7% after the first-quarter report as management forecast full-year revenue growth of 20%, implying a slight deceleration in the coming quarters. Analysts had expected full-year revenue growth of 22%.
Wall Street expects Palantir to grow its adjusted earnings per share by 22% per year through 2026. That consensus estimate makes its current valuation of 97 times earnings look very expensive. Investors should be cautious with this stock. Personally, I intend to avoid Palantir until earnings growth accelerates or the valuation improves.
2. Super microcomputer
Super Micro Computer designs high-performance computing platforms for enterprise and cloud data centers. Its portfolio includes servers and storage systems, ranging from individual appliances to complete rack solutions. Its products can be optimized for use cases such as artificial intelligence and 5G infrastructure, and they feature chips such as Nvidia graphics processing units (GPUs) and Intel central processing units (CPUs).
It’s important to note that Supermicro is the market leader in AI servers due to its manufacturing prowess and modular approach to product development. To be more specific, nearly half of its workforce is engineers, and the company handles most of its research and development activities in-house. “Our engineering prowess, combined with our in-house manufacturing capability, enables rapid prototyping and product deployment.”
Additionally, Supermicro’s modular product design reduces time to market and gives customers flexibility in designing custom solutions. The company can “rapidly assemble a broad portfolio of solutions by leveraging common building blocks across product lines.” In other words, Supermicro can quickly integrate the latest processors, GPUs, and memory into pre-assembled server chassis, often beating competitors to market by two to six months.
Indeed, Supermicro “plans to be the first to deploy full rack clusters powered by Nvidia Blackwell GPUs.” That’s an advantage because enterprises are eager to buy AI hardware and are therefore turning to the server maker that is bringing computing products to market at the fastest pace. As a result, Supermicro’s AI server market share is expected to reach 23% by the end of 2024, up from 10% at the start of the year.
Wall Street expects Supermicro to grow its earnings per share by 48% per year over the next three years. This consensus estimate makes its current valuation of 47 times earnings very reasonable. Indeed, it gives a PEG ratio (price-to-earnings divided by expected earnings growth) of about 1. To put this in context, using the same methodology, Palantir currently has a PEG ratio of 4.4.
Should You Invest $1,000 in Palantir Technologies Right Now?
Before you buy Palantir Technologies stock, consider the following:
THE Motley Fool, Securities Advisor The team of analysts has just identified what they believe to be the 10 best stocks Investors need to buy now…and Palantir Technologies isn’t one of them. These 10 stocks could deliver monstrous returns in the years to come.
Consider when Nvidia I made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $771,034!*
Securities Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building advice, regular analyst updates and two new stock picks each month. Securities Advisor the service has more than quadrupled the return of the S&P 500 since 2002*.
See all 10 actions »
*Stock Advisor returns as of July 2, 2024
Trevor Jennewine holds positions in Nvidia, Palantir Technologies, and Tesla. The Motley Fool holds positions in and recommends Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends Intel and recommends the following options: long Intel January 2025 $45 calls and short Intel August 2024 $35 calls. The Motley Fool has a disclosure policy.
Billionaires are selling Nvidia stock, buying two supercharged artificial intelligence (AI) stocks instead was originally published by The Motley Fool
News Source : finance.yahoo.com
Gn bussni
