In the world of finance, an intriguing trend is emerging: billionaires are selling shares of Nvidia to massively invest in two companies that dominate the artificial intelligence sector. This bold investment strategy raises questions about the future of AI and the evolution of stock markets.
Investors often view Nvidia as one of the key players in artificial intelligence, thanks to its powerful processors used to train advanced AI systems such as ChatGPT from OpenAI or the self-driving software from Tesla. However, some billionaire hedge fund managers have recently chosen to reduce their exposure to Nvidia shares to invest in two other promising companies in the AI field: Palantir Technologies and Super Micro Computer. These two stocks have respectively shown impressive performances of 59% and 198% since the beginning of the year.
Billionaires’ Portfolio Changes
Among notable changes, Louis Bacon of Moore Capital Management sold 2,006 Nvidia shares, reducing his stake by 19%. At the same time, he opened a small position in Super Micro Computer.
Meanwhile, Israel Englander of Millennium Management sold 720,000 Nvidia shares, decreasing his stake by 35%. He increased his investments in Palantir and Super Micro Computer by 4% and 235% respectively.
Philippe Laffont of Coatue Management, on his part, sold 2.9 million Nvidia shares, reducing his stake by 68%. Conversely, he increased his position in Palantir by 40%.
Focus on Palantir Technologies
Palantir Technologies specializes in data analysis. Its software enables government and commercial clients to integrate data, develop AI and machine learning models, and build applications that leverage this data to improve decision-making. Palantir recently introduced its Artificial Intelligence Platform (AIP), which supports large language models and generative AI.
Some industry analysts praise Palantir’s technological expertise. For example, Forrester Research ranked Palantir Foundry as the best AI and ML platform in July 2022. However, others remain skeptical about Palantir’s ability to truly stand out in generative AI.
Financially, Palantir reported strong results in the first quarter, with a 21% increase in revenue to reach $634 million and a 60% rise in non-GAAP diluted earnings per share. However, the annual growth forecast of 20% disappointed the market, resulting in a 7% drop in the stock price.
Emphasis on Super Micro Computer
Super Micro Computer designs high-performance computing platforms for enterprise and cloud data centers. Its portfolio includes servers and storage systems suited for uses such as artificial intelligence and 5G infrastructures. These products incorporate Nvidia graphics processing units (GPUs) and Intel central processing units (CPUs).
The strength of Supermicro lies in its modular approach to product development and its manufacturing expertise. Nearly half of its employees are engineers, which allows for rapid prototyping and speedy product market entry. This speed provides them with a significant advantage in the booming AI server market.
As a result, Supermicro’s market share in AI servers is expected to reach 23% by the end of 2024, up from 10% at the beginning of the year. The annual profit growth expectations over the next three years are set at 48%, making Supermicro’s current valuation, with a PEG ratio of about 1, very attractive.
Points to Consider for Investors
Before investing in Palantir Technologies or Super Micro Computer, it is important to consider several factors. Palantir’s current valuation seems high with a PEG ratio of 4.4, despite expectations of 22% adjusted earnings per share growth through 2026. Therefore, it would be prudent to wait for an acceleration in earnings growth or an improvement in valuation.
On the other hand, Super Micro Computer presents a more reasonable investment opportunity in terms of valuation and growth prospects. Past performances and future developments in the AI server sector could make it an interesting addition to a portfolio focused on technological innovation.
