Billionaires decide to sell shares of this well-known stock

The hottest stock on the market in the last two years has been Nvidia (NVDA -1.59%). As artificial intelligence (AI) technology has advanced, Nvidia has capitalized, preparing for this revolution over the past two decades.

But after Nvidia’s stratospheric rise, several major tech-focused hedge funds and mutual funds recently snapped up some or all of their Nvidia chips (pun intended). Here are three major investors who exited before this summer’s swoon.

Baillie Gifford is reducing her largest position

Perhaps the most “bullish” selling of Nvidia stock this past quarter came from one of its biggest backers, Baillie Gifford. The $128.4 billion mutual fund based in Edinburgh, Scotland, is considered one of the world’s best investors in technology growth stocks.

In the second quarter, Baillie sold 21 million shares of Nvidia, reducing his position by 20.3%.

But that doesn’t mean Nvidia shareholders should panic. Nvidia remained Baillie’s largest holding at 7.9% of the portfolio even after this big discount. Many mutual funds have limits on the size of positions they can take, and many portfolio managers tend to rebalance after a holding appreciates to a large allocation. That seems to be what is happening here.

So investors may not be concerned about Baillie reducing its Nvidia stake.

David Tepper’s Appaloosa is selling its majority stake

Perhaps more bearish than Baillie was the big 84% hack to Appaloosa Management’s Nvidia position.

Appaloosa is led by legendary value investor David Tepper, who was one of the best-performing hedge fund managers of his generation. After founding Appaloosa in 1993, Tepper increased his investors’ wealth by 40% over the next 20 years.

Appaloosa benefited greatly from its Nvidia holding in the first quarter of 2024, as it was a top 10 position for the hedge fund in the first quarter. However, Tepper and his team reportedly cut that stake by 84% in Q2, dropping the allocation from 5.91% at the end of the first quarter to just a 1.38% position as of June 30. largest position out of only 37 long positions.

Image source: Getty Images.

Interestingly, Tepper still seems to believe in technology and AI, as his top positions include Alibaba (NYSE: BABA) and several other Magnificent Seven actions. So it may have been either valuation related or Tepper seeing competition for Nvidia on the horizon. After all, he does too Advanced microdevices (NASDAQ: AMD) in a larger allotment now, which came out with its MI300 graphics processing unit (GPU) this year, as well as all the major cloud infrastructure players now designing their own AI accelerators in-house.

Elliot Management is for sale: don’t believe the hype

Finally, the massive $75 billion hedge fund Elliott Management had a position in Nvidia in the first half of 2024. However, this fund, which specializes in value investing and investment situations activists, turned to the stock market.

Interestingly, Elliott bought the stock in the first quarter, but only a small dip at a minuscule 0.03% allocation. However, Elliott’s portfolio managers apparently had a change of heart and thought even that was too much, and Elliott liquidated its entire position by the end of the second quarter.

Not only that, Elliot said in the Q2 letter that he doesn’t really think AI will be that transformative, noting that there are few relevant use cases for AI beyond “summarizing meeting notes, generating reports and helping with computer coding. .”

Now that’s it a kill, and it’s at odds with what we’re hearing from most technology CEOs, who expect improved utility as AI models improve. But Elliott took the hate a step further with the largest long position at the end of Q2 in put options on Invesco QQQ Trust (QQQ -0.19%) — essentially a bet against the tech sector. This seemed prescient as tech stocks had a big pullback over the summer. Meanwhile, none of the company’s top 25 long positions are in technology, most in energy and financials.

3 distinct risks

In the second quarter, we saw three different variations of Nvidia’s sales. Baillie’s sell appears to be simple risk management after a lot of outperformance, but still with a key belief in Nvidia as a winner going forward. Appaloosa’s sale seems to indicate a preference for less expensive tech names that could begin to make competitive inroads against Nvidia in the AI ​​era. But Elliott’s sales and comments indicate a complete lack of confidence in the hype surrounding AI, with a preference for the more unloved sectors of the market.

Which point of view will prove correct? It largely boils down to how useful AI ultimately becomes as the technology advances and whether Nvidia’s multiple competitors are able to overcome its formidable moat. As they say, only time will tell.