Step aside, Nvidia: Billionaires are selling it in favor of 2 other high-growth stocks

Although artificial intelligence (AI) has been all the rage on Wall Street since the start of 2023, the excitement surrounding stock splits has given AI a run for its money this year.

A stock split gives publicly traded companies the ability to change their stock price and number of shares outstanding by the same magnitude. Splits scratch the surface in the sense that they do not change a company’s market capitalization, nor do they affect underlying operating performance in any way.

Although there are two types of stock splits—forward and reverse—investors typically gravitate toward companies that perform forward splits. This type of split is designed to lower the price of a company’s stock to make it more nominally affordable for investors who can’t buy fractional shares through their broker. Companies that adopt forward splits typically outperform the competition in terms of execution and innovation.

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Since the start of 2024, just over a dozen top companies have announced or completed a stock split — all but one of which was a forward-split.

However, the outlook for some of these top split stocks is mixed among Wall Street’s brightest and richest investors. Based on the latest round of Form 13F filings with the Securities and Exchange Commission, billionaires have been decisive sellers of cutting-edge AI stocks. Nvidia (NVDA 1.92%) in the second quarter, but they were keen buyers of two other high-growth stock splits.

Billionaires continue to lower their stakes in Wall Street’s AI darling

For three consecutive quarters dating back to early October 2023, no less than seven billionaire money managers reduced their respective stakes in Nvidia. The quarter ending in June featured seven billionaire sellers, including (total shares sold in parentheses):

• Ken Griffin of Citadel (9,282,018 shares)
• David Tepper of Appaloosa Management (3,730,000 shares)
• Stanley Druckenmiller of the Duquesne Family Office (1,545,370 shares)
• Cliff Asness of AQR Capital Management (1,360,215 shares)
• Israeli Englander of Millennium Management (676,242 shares)
• Steven Cohen of Point72 Asset Management (409,042 shares)
• Philippe Laffont of Coatue Management (96,963 shares)

Once Nvidia completed its largest forward split (10 for 1) in June, these billionaires could have chosen to call the register and diversify their respective portfolios. But it seems there is more to this story than just profiteering.

While Nvidia has undoubtedly benefited from its first-mover advantage as the preeminent supplier of AI graphics processing units (GPUs), competition is now coming from all angles.

With the debut of Nvidia’s Blackwell chip delayed by at least three months due to reported design flaws and supply chain issues, and the company’s H100 GPU pricing being delayed, it should be relatively easy for competitors external such as Advanced microdevices to find strong demand for their AI GPUs.

Moreover, Nvidia’s top customers signal an eventual reduced reliance on the AI ​​pawn. Its four largest customers by net sales are all developing AI GPUs that they plan to use in their data centers. Even with Nvidia’s chips maintaining their computing edge, the writing is on the wall that these customers intend to use their cheaper domestically developed hardware.

Billionaires may also be spooked by persistent internal sales at Nvidia. While not all insider sales are necessarily nefarious (for example, insiders sometimes sell stock to pay their taxes), it is notable that no executive or board member has purchased stock on the open market since December 2020 .

Finally, billionaire asset managers might be worried about what history tells us. Since the advent of the Internet some three decades ago, every future trend has made its way through a nascent bubble. AI is unlikely to be an exception.

But while the billionaires were showing Nvidia the door, they were busy scooping up shares of two other high-growth split stocks.

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Super Micro Computer

The first stock split to strike the fancy of the six billionaire money managers during the second quarter is Super Micro Computer (SMCI -0.73%)a specialist in customizable rack servers and storage solutions. These billionaire buyers were:

• Israeli Englander of Millennium Management (553,323 shares)
• Jeff Yass of Susquehanna International Group (508,814 shares)
• Ken Griffin of Citadel (98,752 shares)
• Steven Cohen of Point72 Asset Management (45,066 shares)
• Ray Dalio of Bridgewater Associates (15,777 shares)
• Cliff Asness of AQR Capital Management (1,040 shares)

With shares catapulting north of $1,200 in the first quarter, it’s no surprise to see Supermicro’s board approve a 10-for-1 forward split that will take effect after trading closes on September 30.

However, the prospect of a stock split is not the main draw for billionaires at Supermicro. The bait is the seemingly insatiable demand from companies that want to be among the first to capitalize on the AI ​​revolution by training large language models and running generative AI solutions. To do this, they will need the necessary infrastructure, which Supermicro can provide.

The company’s operating results also gave billionaires reason to be excited. Net sales rose 110% to $14.9 billion in fiscal 2024 (the company’s fiscal year ends June 30), and the midpoint of its guidance calls for net income of $28 billion for current year. This forecast screams that demand is exceptional right now.

But it won’t be an easy journey. With Nvidia’s H100 GPUs in use in data center customizable rack servers and the pending H100, Supermicro is at the mercy of its suppliers.

Additionally, the company is the target of a short seller report from Hindenburg Research that alleged accounting manipulation. Despite denying the allegations, management delayed filing its annual operating results, which did little to assuage investor concerns.

Despite its relatively cheap valuation, Super Micro Computer has a lot to prove to Wall Street and investors.

Broadcom

The other split stock that the billionaires clearly favored over Nvidia in the quarter ended in June is providers of AI network solutions and services. Broadcom (AVGO 3.97%). Seven billionaire investors took the plunge in the second quarter, including:

• Ole Andreas Halvorsen of Viking Global Investors (2,930,970 shares)
• Jeff Yass of Susquehanna International Group (2,347,500 shares)
• Israeli Englander of Millennium Management (2,096,440 shares)
• Ken Griffin of Citadel (1,880,740 shares)
• John Overdeck and David Siegel of Two Sigma Investments (1,332,230 shares)
• Ken Fisher of Fisher Investments (865,090 shares)

Keeping with the theme of this list, Broadcom also announced a 10-for-1 split (the first in company history) that was completed in mid-July.

Broadcom’s AI ties have certainly been the engine behind the recent surge in growth. In particular, the company’s networking solutions are responsible for connecting a large number of AI GPUs to reduce latency and maximize the computing potential of AI-accelerating hardware. Demand for its AI networking solutions is likely to remain robust as long as companies keep gobbling up AI GPUs.

However, billionaires may be just as excited that Broadcom has a solid foundation that extends well beyond artificial intelligence. It generates a significant amount of revenue and profits from the wireless chips and accessories it offers for high-end smartphones. And it is a key supplier of optical components used in automated industrial equipment, as well as network solutions for next-generation vehicles.

Finally, billionaires may be impressed by the company’s track record of earnings-enhancing acquisitions. For example, the $69 billion acquisition of cloud-based virtualization software company VMware in November 2023 perfectly positions Broadcom to be a major player in helping companies with their private and hybrid cloud needs.

With a more diverse revenue stream than Nvidia or Super Micro Computer, Broadcom would be best positioned to navigate an AI bubble burst event, should it occur.