Billionaires are selling Nvidia shares and buying an AI stock that could rise 215%, according to some Wall Street analysts

Nvidia (NVDA -4.08%) has been the heart of the artificial intelligence (AI) boom until now. However, the hedge fund billionaires listed below reduced their positions in Nvidia stock during the second quarter as they bought shares at Super Micro Computer (SMCI -6.79%).

• AQR Capital Management’s Cliff Asness sold 1.3 million Nvidia shares, reducing his stake by 8%. He also bought 1,040 shares of Supermicro, sending his position 2% higher.
• Israeli Englander of Millennium Management sold 676,242 shares of Nvidia, reducing its stake by 5%. It also bought 553,323 shares of Supermicro, increasing its position by 807%.
• Ken Griffin of Citadel Advisors sold 9.2 million shares of Nvidia, reducing his stake by 79%. It also added 98,752 shares of Supermicro, increasing its position by 96%.
• David Shaw of DE Shaw & Co. sold 12.1 million Nvidia shares, reducing his stake by 52%. He also opened a new position in Supermicro.

The trades by Griffin, Shaw and Englander are particularly noteworthy because they manage the three most successful hedge funds, as measured by net earnings since inception, according to LCH Investments. Importantly, all four fund managers still have major exposure to Nvidia, so we can’t assume they see the chipmaker as a bad investment.

But we can assume that fund managers see Supermicro as a worthwhile investment, and apparently two Wall Street analysts agree. Northland Securities’ Nehal Chokshi and Rosenblatt’s Hans Mosesmann set 12-month price targets of $1,300 per share on Supermicro. These forecasts imply a 215% upside from the current share price of $413.

Here’s what investors should know about Nvidia and Supermicro.

1. Nvidia

Nvidia has more than 90% market share in data center graphics processing units (GPUs), chips that accelerate the processing of complex workloads such as artificial intelligence (AI) applications. The company accounts for more than 70% of AI chip sales, and some analysts estimate its revenue share to be over 90%. Nvidia also dominates the market for generative AI networks, fittingly Morningstar.

The hardware drive is fantastic, but Nvidia has expanded its ability to monetize AI with subscription software and cloud services, both of which generate recurring revenue. For example, Nvidia’s AI Foundry platform supports the development of custom generative AI models. And the Nvidia AI Enterprise platform supports the development of AI applications in use cases such as robotics, recommender systems and logistics route optimization.

Nvidia posted a strong financial performance in the second quarter of fiscal 2025 (which ended in July). Sales grew 122% to $30 billion due to strong demand for AI hardware and software. Non-GAAP earnings rose 152% to $0.68 per diluted share.

CFO Colette Kress said Blackwell GPU production will ramp up in the fourth quarter, about three months later than originally anticipated. Blackwell is the next generation of Nvidia data center chips. It provides up to four times faster AI training and 30 times faster AI inference than the previous Hopper architecture. “The anticipation for Blackwell is incredible,” CEO Jensen Huang told analysts.

Wall Street expects Nvidia to grow earnings at an annual rate of 37% over the next three years. That estimate makes its current valuation of 50 times earnings look reasonable. At that price, I wouldn’t be surprised to hear that the fund managers mentioned earlier bought Nvidia shares in the third quarter.

2. Super Micro Computer

Supermicro develops high-performance computing platforms for enterprise data centers and the cloud. Its products range from single servers to complete server racks equipped with networking and storage. The company has secured a leading position in the AI ​​server market thanks to its in-house manufacturing capabilities and its modular approach to product development.

These advantages allow the company to quickly build a wide range of server products with the latest chips from vendors such as Nvidia. Supermicro can typically bring new technology to market faster than its competitors, often two to six months earlier. That time-to-market advantage should keep the company at the top of the AI ​​server market.

Supermicro reported mixed financial results in the fourth quarter of fiscal 2024 (which ended in June). Sales rose 144% to $5.3 billion on record demand for AI infrastructure. But gross profit margin fell nearly 6 percentage points, so non-GAAP net income rose just 78% to $6.25 per diluted share. Management said its weaker margins came from temporary headwinds, but the stock still fell 20% the day after the Q4 report was released.

Shortly thereafter, shareholders received more bad news when short seller Hindenburg Research published a report alleging “egregious accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures and customer issues “. Supermicro shares have fallen 24% since the report was released in late August, so the stock is now 65% off its all-time high.

Over the past five years, Hindenburg has flagged alleged wrongdoing at more than two dozen companies, sometimes with lasting consequences. For example, Nicholas shares have fallen 99% since the short seller accused the company of lying to shareholders in September 2020. But some of Hindenburg’s short reports have come to nothing. For example, Block shares have advanced 5% since the fintech was targeted by the short seller in March 2023.

In view of the available information, Samik Chatterjee at JPMorgan is not particularly concerned about the allegations regarding Supermicro. “We view the report as largely lacking in detail about the alleged wrongdoing,” he wrote in a recent note. He also maintained his price target of $950 per share, implying a 130% upside.

More broadly, Wall Street still expects Supermicro to grow revenue by 46% annually over the next three years. That makes its current valuation of 21 times earnings look cheap. These numbers give it a price-to-earnings-growth (PEG) ratio of 0.46, which is a substantial reduction from its three-year average of 0.89.

Here’s the bottom line: The stock probably won’t triple in the next 12 months, and there are certainly risks around the short ratio. However, the current price is a reasonable entry point for patient investors, and Supermicro has a good chance to beat the market in the next three to five years.