Billionaires are selling off Nvidia shares and buying two super-powered AI stocks instead

AI News

Many investors NVIDIA (NASDAQ: NVDA) The company's chips support OpenAI's ChatGPT and TeslaFull self-driving software.

But some hedge fund billionaires sold off Nvidia shares in the first quarter, Palantir Technologies (NYSE: PLTR) and/or Super Microcomputer (NASDAQ:SMCI)two super-powerful AI stocks with year-to-date returns of 59% and 198%, respectively.

  • Moore Capital Management's Louis Bacon sold 2,006 shares of Nvidia stock in the first quarter, reducing his holdings by 19 percent, while Bacon also started a small investment in Super Micro Computer.

  • Millennium Management's Israel Englander sold 720,000 shares of Nvidia in the first quarter, reducing his holdings by 35%, while Englander increased his holdings in Palantir and Supermicro Computer by 4% and 235%, respectively.

  • Coatue Management's Philippe Lafont sold 2.9 million shares of Nvidia in the first quarter, reducing his holdings by 68%, while Lafont increased his holdings in Palantir by 40%.

The Israel Englander trade is particularly noteworthy. Millennium Management S&P 500 Over the past three years, it has ranked as the second-best performing hedge fund of all time, as measured by net returns since inception. Here's what investors need to know about Palantir and Supermicro.

1. Palantir Technologies

Palantir specializes in data analytics. The company's software enables government and commercial customers to integrate data, develop artificial intelligence (AI) and machine learning (ML) models, and build applications that leverage those datasets and models to improve decision-making. Palantir recently announced its Artificial Intelligence Platform (AIP), a product that supports large-scale language models and machine learning. Generative AI to your existing software.

Some industry analysts have praised the company's technology. Forrester Research ranked Palantir Foundry as the best AI/ML platform in a report published in July 2022. Also, Dresner Advisory Services ranked Palantir as a leader in the AI/ML and data science market in a report published in August 2023.

But other analysts are skeptical. RBC Capital's Rishi Jallia said conversations with industry observers and company employees led him to conclude that Palantir “doesn't offer anything truly differentiated when it comes to generative AI.”

Palantir reported fairly good results in the first quarter, with sales beating expectations and profits in line with expectations. The company's customer base grew 42% to 554, and average spend among existing customers increased 11%. As a result, revenue grew 21% to $634 million, its third consecutive quarter of growth, and non-GAAP earnings rose 60% to $0.08 per diluted share.

Chief Financial Officer Dave Glaser said the commercial division benefited from “unprecedented demand driven by AIP momentum.” But shares fell 7% following the first-quarter report after management forecast full-year revenue growth of 20%, slowing slightly in coming quarters. Analysts had expected full-year revenue growth of 22%.

Going forward, Wall Street expects Palantir to grow its adjusted earnings per share at 22% annually through 2026. At this consensus estimate, the company's current valuation of 97 times earnings seems very expensive. Investors should be cautious with the stock. Personally, I'd avoid Palantir until earnings growth accelerates or the valuation improves.

2. Supermicrocomputer

Supermicro designs high-performance computing platforms for enterprise and cloud data centers. Its portfolio includes servers and storage systems, from individual devices to full rack solutions. The company's products are optimized for use cases such as artificial intelligence and 5G infrastructure and feature chips such as Nvidia graphics processing units (GPUs). Intel Central Processing Unit (CPU).

Importantly, what makes Supermicro the market leader in AI servers is its manufacturing prowess and its building-block approach to product development. Specifically, nearly half of the company's employees are engineers, and the company does most of its research and development in-house. “Our engineering capabilities, combined with our in-house manufacturing capabilities, enable rapid prototyping and product deployment.”

Additionally, Supermicro's modular product design accelerates time to market and gives customers the flexibility to design custom solutions. Supermicro can “rapidly build a broad portfolio of solutions by leveraging common building blocks across its product lines.” This means Supermicro can quickly integrate the latest CPUs, GPUs and memory into pre-assembled server chassis, often getting to market two to six months faster than competitors.

In fact, Supermicro “expects to be the first to market with full-rack clusters powered by Nvidia Blackwell GPUs.” This is good news, because businesses are eager to buy AI hardware and are looking to server makers to bring computing products to market the fastest. As a result, Supermicro's AI server market share is expected to reach 23% by the end of 2024, up from 10% at the start of the year.

Going forward, Wall Street expects Supermicro to grow its earnings per share at 48% annualized over the next three years. At this consensus estimate, its current valuation of 47 times earnings looks very reasonable. In fact, it works out to a PEG ratio (price-to-earnings ratio divided by projected earnings growth rate) of roughly 1. For reference, using the same methodology, Palantir's current PEG ratio is 4.4.

Should you invest $1,000 in Palantir Technologies right now?

Before buying Palantir Technologies stock, consider the following:

of Motley Fool Stock Advisor The analyst team Top 10 Stocks Here are the stocks investors should buy right now: Palantir Technologies was not included. The 10 stocks selected could generate huge profits over the next few years.

Things to consider NVIDIA This list was created on April 15, 2005…If you invested $1,000 at the time of recommendation, That comes to $771,034.!*

Stock Advisor With portfolio construction guidance, regular updates from our analysts, and two new stock picks every month, we provide investors with an easy-to-follow blueprint for success. Stock Advisor The service is More than 4 times S&P 500 Recovery Since 2002*.

View 10 stocks ยป

*Stock Advisor returns as of July 2, 2024

Trevor Jennewine has investments in Nvidia, Palantir Technologies, and Tesla. The Motley Fool has investments in and recommends Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends Intel and recommends buying January 2025 $45 calls on Intel and selling August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.

Billionaires are selling off Nvidia shares and buying two super-powered artificial intelligence (AI) stocks instead. This article was originally published by The Motley Fool.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *