Over the past two years, there has been no better trend on Wall Street than the rise of artificial intelligence (AI). In Determine the pricePwC analysts predict that AI will increase global gross domestic product by $15.7 trillion by 2030.
Artificial Intelligence’s overwhelming potential to infiltrate nearly every sector and industry of the global economy is not lost on Wall Street analysts or are best money managers. Quarterly filed Form 13Fs give investors the opportunity to track the buying and selling activities of Wall Street’s leading money managers.
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Although Berkshire HathawayWhile Warren Buffett is the most followed of all billionaire investors, there are plenty of other billionaire asset managers known for making waves on Wall Street. Jeff Yass of Susquehanna International is the perfect example. Yass made a name for himself in the 1980s as a highly successful options trader, a strategy that Susquehanna employs today through its market-making business.
Granted, 13Fs don’t tell the full story about billionaire money managers. For example, Susquehanna’s 13F will not show short positions or options where the company has a short position. Nevertheless, these documents can still be useful in deciphering which stocks, industries, sectors and trends are capturing the interest of the big investors on Wall Street.
Susquehanna’s 13F shows that Yass and his team have been decisive sellers Palantir Technologies‘ (NYSE:PLTR) shares since the start of 2024, and have piled into another AI stock that has been consistently in the news lately (albeit for the wrong reasons).
With the exception of the company’s AI graphics processing unit (GPU). Nvidiathere’s probably not a hotter AI stock on the planet than Palantir. The company’s shares are up 546% in the past two years, as of the closing bell on November 5.
Despite this outperformance, Susquehanna’s 13Fs show that 1,539,566 Palantir shares were sold in the first half of 2024, representing a 61% reduction. I repeat: Yass and his team rely on put and call options, as well as potential short options not listed in a 13F, to hedge their common stock positions.
The logical reason for investors to take Palantir to the exit is its valuation. Even as the company comfortably beats Wall Street’s third-quarter revenue and earnings expectations and raises expectations in both areas for the remainder of the current year, its shares are valued at 39 times annual revenue and roughly 116 times expected earnings . These are nosebleeds for a tech stock whose growth rate has slowed significantly in recent years.
There is also plenty of incentive to simply open the register and lock in profits as the broader market reaches one of its most expensive valuations on record. The S&P500The Shiller price-to-earnings (P/E) ratio, also known as the cyclically adjusted P/E ratio, or CAPE ratio, closed at 36.83 on November 5, which is more than double the 153- annual average of 17.17. Historically, an S&P 500 Shiller price-to-earnings ratio has been north of 30. possibly (key word!), did not bode well for growth stocks trading at sky-high valuations.
On the other hand, Wall Street has shown a willingness to pay a premium for companies that are in trouble and irreplaceable. Palantir certainly meets this definition. The AI-powered Gotham platform plays a critical role in mission planning and execution for federal governments. Meanwhile, the Foundry platform relies on AI and machine learning to help companies understand their data and streamline their operations. No company offers what Palantir can do at scale.
Currently, Palantir’s strong ties with the US government have fueled Palantir’s growth and profitability. The contracts it signs with the U.S. government typically have terms of four or five years, leading to highly predictable operating cash flow for an already cash-rich company.
But as I’ve noted in the past, Gotham’s runway is somewhat limited. While the US government has an insatiable appetite for Palantir’s solutions, Palantir will not allow non-allies of the US to use its Gotham platform. This means that Foundry will be the main growth driver in the coming years.
While Palantir stock definitely deserves a premium, I think there are simply too many question marks about its valuation and future growth prospects to support the nosebleed multiple.
At the other end of the spectrum, Yass’s Susquehanna International has been a decisive buyer of what has become a headline-grabbing AI stock. I’m talking about a specialist in customizable rack servers and storage solutions Super microcomputer (NASDAQ: SMCI).
With the understanding that Susquehanna is hedging this position with put and call options, and may have short options not listed on the 13F, Yass and his team have increased their stake in Super Micro by 7,702,320 shares in the first six months of 2024. or 927% from the position as of December 31, 2023. Note: This figure has been adjusted to take into account Super Micro Computer’s first-ever stock split (10-for-1), which occurred after the close of trade on September 1. 30.
Super Micro bulls are in love with the company’s ideal positioning amid the AI revolution. Companies that want to claim early mover advantages in their respective industries must invest aggressively in data center infrastructure. In fiscal 2024 (ending June 30, 2024), Super Micro reported net sales of $14.94 billion, which represents a 110% increase over what the company achieved last year.
The other major selling point for Super Micro Computer is the use of Nvidia’s ultra-popular H100 GPU in its rack servers. Companies want to implement the best AI solutions in their data center, and Super Micro has responded by integrating GPUs with superior computing potential.
Unfortunately, the buzz surrounding this company hasn’t been good lately, as Super Micro shares’ nearly 80% retracement from their highs this year suggests.
The trouble started in late August, when noted short-seller Hindenburg Research released a report accusing Super Micro Computer of “accounting manipulation.” Although the company denied these claims, it has since delayed the filing of its annual report The Wall Street Journalis facing an early investigation into its accounting practices by the U.S. Department of Justice.
Things have accelerated further in the past week. Accounting firm Ernst & Young, which had previously raised concerns about Super Micro’s internal controls, resigned. Meanwhile, Super Micro’s preliminary first-quarter operating results missed the company’s previous expectations and the company did not provide a timeline for the filing of its annual report, which was due on August 29.
To be clear, I’m not passing judgment on the company’s accounting practices. That is up to regulators and accounting firms to decide. But at the very least, avoiding Super Micro Computer stock seems like a sensible course of action until its accounting practices get a clean slate and the company’s annual report is filed.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Berkshire Hathaway, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.
Billionaire Jeff Yass sold 61% of Susquehanna’s stake in Palantir and piles on new stock in artificial intelligence (AI) originally published by The Motley Fool
