Billionaire Ken Griffin just sold 9.3 million shares of Nvidia and bought other artificial intelligence (AI) stocks headed for the S&P 500.

From sifting through investor presentations and corporate filings to listening to earnings calls and watching interviews, getting a firm valuation on an investment often takes a lot of work.

One thing I like to do is review 13F filings. These are forms filed by investment firms that manage more than $100 million in stocks. One of the most important hedge funds is Ken Griffin’s Citadel. Last quarter, Citadel reduced its stake Nvidia (NVDA -1.59%) by 79% — dumping 9,282,018 shares. Additionally, the firm increased its position by 1,140% in Palantir Technologies (PLTR 1.00%)collecting 5,222,682 shares.

Let’s dig into what might have led Griffin and his portfolio managers to sell Nvidia and buy Palantir. Plus, I’ll explore what catalysts could drive even greater growth for Palantir — and why now might be a great time to follow Griffin’s lead.

Why Sell Nvidia Right Now?

On the surface, selling Nvidia stock might seem like a questionable move. After all, isn’t artificial intelligence (AI) the next big thing?

Well, even if artificial intelligence turns out to be the generational opportunity that it is said to be, that doesn’t mean much at face value. There are many components to the foundations of AI, and Nvidia’s expertise in developing advanced chipsets called graphics processing units (GPUs) is just one of the many building blocks that underpin artificial intelligence.

The biggest bear narrative surrounding Nvidia comes from increasing competition. Currently, the products developed by Advanced microdevices and Intel are the most obvious alternatives to Nvidia. However, I see more risk in the competitive landscape.

Namely, Nvidia’s big technology cohorts, including adze, Meta platforms, Microsoftand Amazon they all invest heavily in their own hardware development. Given that many of these companies are Nvidia’s own customers, I fear that the company’s current growth trajectory is sustainable in the long term.

When more GPUs come to market, there’s a good chance that this technology will be seen as somewhat commercialized. Such a dynamic will likely lead to lower prices for Nvidia, which will subsequently bring down revenues, margins and profits.

All in all, I don’t blame Griffin for selling such a large portion of his Nvidia position. Despite the company’s success so far, its future prospects look potentially questionable.

Image source: Getty Images.

Why Buy Palantir Right Now?

In a different area of ​​the AI ​​landscape is enterprise software company Palantir. It offers four data analytics platforms called Foundry, Gotham, Apollo and AIP. The company’s software is used in a number of use cases in the US military and private sector.

PLTR Revenue Data (Quarterly) by YCharts

Investors can see that over the past two years, Palantir’s revenue has accelerated on the back of an upbeat AI narrative. More importantly, the company’s operating leverage improved dramatically in the form of margin expansion and consistent profitability.

Earlier this month, Palantir also hit the notable milestone of being included in the S&P 500.

Should you buy Palantir stock right now?

I can’t say for sure why Griffin increased his stake in Palantir so much last quarter, but I find the timing interesting for a reason. Palantir has been eligible for the S&P 500 before, but was not initially selected. Some may have thought that Palantir’s new growth was just an extension of the demand for AI software and would not be sustainable in the long term.

Whatever the case, I think those who have followed Palantir for a long time understood that the company’s long-term prospects looked solid — regardless of the current AI narrative. With that in mind, it was reasonable to think that the company would be included in the S&P 500 eventually.

This brings me to a broader point. Now that Palantir is in the S&P 500, there’s a good chance more investment banks and research analysts will start watching the company more closely. In turn, this could lead to an increase in institutional investors buying the stock. Over time, this could strengthen Palantir’s brand and perception in the investment community and drive the stock to even higher prices.

I think there is a good chance that Palantir will see an increase in institutional ownership. The company is quickly emerging as a force in the AI ​​software arena and has even attracted the likes of Microsoft and Oracle — two relationships that I believe will bring even more growth to the company.

I see even better days ahead for Palantir and think now is a great time to buy the stock. With so many catalysts fueling the company’s upside, I see Griffin swapping Nvidia for Palantir as a particularly smart move.