Billionaires are still buying Nvidia Hand Over Fist. Should you follow?

Investors flocked to Nvidia (NVDA 0.43%) in recent years thanks to its leading position in the high-growth market for artificial intelligence (AI) chips and triple-digit earnings growth. This helped the stock grow by four digits over five years.

However, Nvidia has lost momentum of late as some investors worried about stiffer competition from rivals such as Advanced microdevices or Intelwhich focused on providing better and better AI chips. Nvidia’s stock has been reeling in recent months, down 8% from a peak in June.

Still, Nvidia hasn’t lost its luster in the eyes of several billionaire investors. In the second quarter, many — including Appaloosa Management’s David Tepper, Millennium Management’s Israel Englander, Point72 Asset Management’s Steven Cohen and Bridgewater Associates’ Ray Dalio — increased their positions in the company. And Andreas Halvorsen, from Viking Global Investors, opened a new chip leader position.

Looks like billionaires are still buying Nvidia out of hand. Should you follow?

Image source: Getty Images.

The fastest GPUs

First, a little background on Nvidia. The company rose to fame in the AI ​​field thanks to its powerful graphics processing units (GPUs). With the ability to handle many things at once, they are perfect for critical AI tasks such as model training and inference. Nvidia GPUs are the fastest on the market, and the company is innovating quickly to maintain its lead. In fact, it promises to update its GPUs annually.

The company isn’t just about GPUs. It markets an entire portfolio of AI products and services to meet all AI customer needs — from software to networking. This helped the company grow its quarterly revenue beyond its annual revenue level as recently as FY2023.

Now let’s consider the recent moves of the billionaires we mentioned above. In the second quarter, they did the following:

• Appaloosa’s David Tepper increased his Nvidia holdings by 56% to 690,000 shares.
• Millennium Israel Englander increased his Nvidia holding by 850% to 12,752,118 shares.
• Point72’s Steven Cohen increased his position by 738% to 2,115,018 shares.
• Bridgewater’s Ray Dalio increased its holdings by 831% to 6,556,193 shares.
• Viking’s Andreas Halvorsen opened a new position in Nvidia by buying 1,384,547 shares.

Some of these billionaires weren’t Nvidia buyers every quarter, and instead took gains from time to time. For example, Appaloosa’s Tepper, before his recent move to increase his Nvidia position, effectively reduced his holdings in the first quarter of this year by 44%, leaving him with 442,000 shares.

However, from the action seen in the second quarter, it’s fair to say that a number of billionaires are still buying Nvidia stock out of hand and are optimistic about the company’s future.

Nvidia’s AI empire

Let’s get to our question: Should you follow these successful investors?

There are reasons to be optimistic about Nvidia, even after its extraordinary gains in recent years. This is due to the AI ​​empire he has built and his focus on innovation to maintain his leadership.

This technological expertise and its solid reputation — adze Chief Executive Officer (CEO) Elon Musk said: “There’s nothing better than Nvidia hardware for artificial intelligence right now” – give Nvidia something investors love. This is a moat, or competitive advantage, that should keep it ahead of its rivals.

Additionally, now is a great time to get into the Nvidia story, as an interesting catalyst awaits. The company plans to release its new Blackwell architecture later this year, and demand has already outstripped supply. Success here could lead to additional positive stock performance in the near term and over time. The company even says it expects Blackwell to deliver billions of dollars in revenue as early as the fourth quarter.

It’s true that competition in the market is increasing, but given the demand for AI products and services, there’s room for other chip designers to generate revenue growth — without troubling Nvidia. Recent billionaire purchases of Nvidia stock suggest they realize all this and are sticking with this top player as a new wave of growth — led by Blackwell — arrives. You can also get a win if you follow this last move.