Billionaires are selling Nvidia and buying these shares instead

Nvidia (NVDA 4.55%) has been the biggest winner of the AI ​​boom so far, but not everyone thinks the good times will last.

In fact, hedge funds continued to reduce their exposure to popular stocks in the second quarter, continuing a trend from the first quarter. In the period since Nvidia hit a market cap high in June after the stock split, 326 hedge funds reduced their positions, according to Whale Wisdom, while 264 hedge funds increased their positions.

While many of the hedge fund managers who reduced their stakes in Nvidia still hold large stakes in AI stock, their decision to reduce their exposure to it shows that they believe the stock’s biggest gains may be behind . Let’s take a look at two of the stocks that billionaire investors are buying to replace Nvidia.

Image source: Getty Images.

1. Apple

It shouldn’t be a big surprise to find Apple (AAPL 1.03%) on hedge fund shopping lists. Not only is it the largest holding in Warren Buffett’s stock portfolio Berkshire Hathawaybut it’s also the world’s most valuable company and a long-time stock market winner.

Apple seemed to be behind in the AI ​​race, but the company changed that impression when it unveiled its new Apple Intelligence platform, which includes AI tools like a writing assistant and image generation, and will soon be available on the most advanced iPhones. The move also underscores Apple’s key advantage in AI — its installed base of more than 2 billion devices, which allows it to get its software and services in front of large numbers of users.

One of the hedge funds that reduced its Nvidia holdings and bought Apple last quarter was GQG Partners, a boutique investment firm based in Fort Lauderdale, Florida. In the second quarter, GQG sold nearly 58 million Nvidia shares and added 11.3 million Apple shares. Nvidia remains GQG’s largest holding, but has sold more than 40 percent of its stake in the GPU maker. His Apple stake is completely new.

Ken Griffin’s Citadel Advisors, one of the world’s largest hedge funds, also swapped some Nvidia stock for Apple in the quarter. It added 2.6 million Apple shares worth about $500 million in the quarter. At the same time, it sold 9.3 million Nvidia shares, or about $1 billion worth, leaving it with just 2.4 million shares. Citadel has additional exposure to Nvidia through options.

2. Lyft

While Apple seems like a logical choice for hedge fund investors looking to spin out of Nvidia, Lyft (LYFT 1.83%) is more surprising. The shares of company no. 2 ride-hailing has fallen sharply since its 2019 IPO — its initial valuations were unsustainable, and the pandemic has also caused its business to take a downturn.

However, Lyft now appears poised for a comeback under a new management team that has slashed spending on incentives and rolled out popular new options, such as giving female riders and drivers the ability to match with other women. Revenue rose 41% year-over-year to $1.44 billion in the second quarter and reported a generally accepted accounting principles (GAAP) profit.

Billionaire investors seem to be taking notice. David Tepper’s Appaloosa Management added 7.5 million Lyft shares in the first quarter, or about $100 million. Meanwhile, he shed almost all of his stake in Nvidia, selling 3.7 million shares to leave the fund with just 690,000 shares of AI stock.

Griffin’s Citadel also added to its stake in Lyft, buying 4.4 million shares of the ride-hailing stock during the quarter, or about $50 million.

For a company the size of Lyft — its market cap is less than $5 billion — that indicates a considerable amount of optimism from the professional investment set. Combined, Tepper and Griffin own more than 3 percent of the stock.

Lyft is a much different company than Apple, but the acquisitions by Griffin and Tepper, as well as the momentum in its turnaround efforts, should give retail investors confidence to buy the stock. There is plenty of upside potential here as the financial situation continues to improve.