Billionaires sell Nvidia stock and buy 1 AI stock split into Handover Fist shares

Artificial Intelligence (AI) enthusiast. Nvidia (NVDA 1.40%) has generated incredible returns for shareholders of late, so much so that the chipmaker completed a 10-for-1 stock split in June to reset its rising stock price.

Even so, the hedge fund managers listed below reduced their positions in Nvidia during the second quarter, while reinvesting profits in Broadcom (AVGO -0.25%)another semiconductor company that recently completed a 10-for-1 stock split.

• Israeli Englander of Millennium Management sold 676,242 shares of Nvidia, reducing its stake by 5%. It also increased its stake in Broadcom by 55%, making it its eighth-largest position, excluding options.
• Ken Griffin of Citadel Advisors sold 9.2 million shares of Nvidia, reducing his stake by 79%. Meanwhile, it has increased its stake in Broadcom by 64%, and is now the 10th largest, excluding options.
• David Shaw of DE Shaw & Co. sold 12.1 million Nvidia shares, reducing his stake by 52%. Meanwhile, it increased its stake in Broadcom by 229%, and is now its seventh-largest position.

Those three money managers run the top-performing hedge funds as measured by net since-start earnings, so the trades by Englander, Griffin and Shaw are noteworthy. Here’s what investors should know about Nvidia and Broadcom.

Nvidia: AI stock split billionaires selling

Nvidia’s graphics processing units (GPUs) are the gold standard in accelerated computing, a discipline that combines specialized hardware and software to accelerate complex workloads such as 3D graphics and AI applications. Nvidia has over 95% market share in workstation GPUs and over 90% market share in data center GPUs. More importantly, the company currently accounts for over 80% of AI chip sales.

Nvidia’s success is largely due to its robust software ecosystem. Its CUDA platform includes hundreds of software libraries (building blocks) that simplify model training and application development in a wide range of disciplines, such as scientific computing, data science, and machine learning. The CUDA ecosystem has been in development for nearly two decades, making Nvidia GPUs the ideal choice for developers of accelerated computing applications, especially in AI.

CFRA’s Angelo Zino believes that Nvidia “will be the most important company for our civilization in the next decade.” This brings me to an important point. Despite reducing their positions in Nvidia during the second quarter, two of the hedge fund managers mentioned earlier still have substantial exposure to the stock. Excluding options, Nvidia is the fifth largest position in Israel Englander’s portfolio and the third largest in David Shaw’s portfolio.

Nvidia stock could be volatile in the short term as it reports earnings on August 28 and because shipments of Blackwell GPUs have been delayed by three months. These chips, which offer much faster AI training and inference compared to the previous Hopper architecture, were supposed to ship later this year. Management will likely discuss the situation on the earnings call, and the stock could move sharply depending on the context.

That said, Blackwell GPUs will ship eventually, and Nvidia is ideally positioned to benefit as companies spend more money on AI. Wall Street expects earnings to grow 37% annually over the next three years. That makes its current valuation of 73 times earnings look relatively reasonable. These numbers have a price-to-earnings-growth (PEG) ratio of 2, which is well below the three-year average of 3.1.

Investors interested in holding Nvidia stock should start with a small position today. If the stock falls when the company reports earnings later this month, consider buying a few more shares.

Broadcom: AI Stock Split Billionaires Buy

Broadcom is splitting its business into semiconductor solutions and infrastructure software. The company has a strong presence in both spaces. Within semiconductor solutions, Broadcom is a market leader in network chips and application-specific integrated circuits (ASICs), custom chips for specialized use cases such as AI.

Within infrastructure software, Broadcom subsidiary VMware is the market leader in server virtualization software and hyperconverged infrastructure, a term that refers to software-defined platforms that combine virtualized computing, storage and networking to help businesses use physical infrastructure more efficiently. Forrester Research also recognized the company as a leader in cloud cost management software.

Its leadership in networking chips should help Broadcom monetize AI, but its leadership in ASICs could be a particularly big source of momentum. ASICs currently make up less than 10% of AI chips, but Morgan Stanley believes that this figure could reach 30% in five years. This prediction implies that ASICs will take over from GPUs in AI computing. Goldman Sachs Analysts recently wrote: “Along with Nvidia, we view Broadcom as a critical piece to the ongoing AI infrastructure development.”

Looking ahead, Wall Street expects Broadcom to grow non-GAAP (generally accepted accounting principles) earnings per share by 21% annually through 2026. That consensus estimate makes the current valuation of 37.8 times non-GAAP earnings seem reasonable. Patient investors should consider buying a small position in this semiconductor stock today.