Releasing key figures is a common occurrence on Wall Street. Between earnings season, when a vast majority of Wall Street’s largest and most influential companies report their quarterly operating results, and the daily economic reports, it can be easy to miss something important.
For example, you may have missed what could be described as the most important data dump of the fourth quarter this past week. November 14 marked the deadline for institutional investors with at least $100 million in assets under management (AUM) to file Form 13F with the Securities and Exchange Commission. This filing provides a snapshot alerting investors to the stocks that Wall Street’s most prominent money managers bought and sold in the last quarter (i.e. ending September 30).
Do you miss the morning spoon? Wake up with Breakfast news in your inbox every market day. Register for free »
Although investors tend to delve into Warren Buffett’s trading activities Berkshire HathawayThe Oracle of Omaha is far from the only billionaire asset manager who has been very successful on Wall Street.
Image source: Getty Images.
For example, Ray Dalio, the billionaire money manager of Bridgewater Associates, also has the following. Dalio, which runs a well-diversified fund that benefits from economic trends, ended the third quarter with nearly $17.7 billion in assets under management.
Of the hundreds of trades Dalio and his team executed during the quarter ended September, perhaps none stands out more than the buying and selling activity associated with three of Wall Street’s most popular artificial intelligence (AI) stock split stocks.
The first eye-popper is that Ray Dalio was a big seller of the market’s leading AI stock split stocks. Nvidia(NASDAQ: NVDA). Nvidia completed its largest stock split ever (10-to-1) after the close of trading on June 7.
Despite Nvidia’s AI graphics processing units (GPUs) dominating in high-compute data centers, and the company having significant pricing power on its H100 and Blackwell GPUs, Dalio’s Bridgewater lost 1,801,922 shares of Nvidia in the third quarter. This represents a decrease of 27% compared to the position on June 30. While profit-taking may be the main catalyst for Bridgewater, there’s potentially more to this story than just phoning the cash register.
For example, Nvidia stock has seen an almost parabolic rise due to the AI revolution. However, history tells us that every breakthrough technology since the advent of the Internet has fought its way through an early-stage bubble. Investors often overestimate the speed at which new technologies are adopted by companies and consumers, ultimately leading to high expectations not being met.
Dalio and his team could also be discouraged by US regulators restricting Nvidia’s potential. In 2022 and 2023, regulators restricted exports of powerful AI chips to China, the world’s second-largest economy by gross domestic product. China makes an important contribution to Nvidia’s turnover and profit.
Finally, the brightest minds at Bridgewater Associates may expect a significant increase in AI-GPU competition. In addition to growing external competition, many of Nvidia’s largest customers by net revenue (particularly members of the “Magnificent Seven”) are developing their own AI chips internally. While these internally developed AI chips will likely lag behind Nvidia in computing potential, they will be significantly cheaper and easier to access. In other words, it could result in Nvidia losing valuable data center space in the coming quarters.
Image source: Getty Images.
But while Dalio and his top investment advisors were unwinding Bridgewater’s position in Nvidia, they were actively pursuing two other prominent AI stock split stocks.
Based on the latest 13F, 710,793 shares of an AI networking solutions specialist Broadcom(NASDAQ:AVGO) were purchased, increasing Bridgewater’s stake by 291% in three months. Broadcom completed its first-ever stock split (also 10-for-1) after the close of trading on July 12.
Just as Nvidia’s GPUs have gained a monopoly-like share of enterprise data centers, Broadcom’s AI networking solutions are the preferred choice for businesses. The Jericho3-AI fabric can connect up to 32,000 GPUs, with the aim of reducing tail latency and maximizing computing potential. Reducing tail latency is especially important in data centers where split-second decisions are made by AI-driven software and systems.
But perhaps the most important thing about Broadcom is that it is much more than an AI company. While AI accounts for the lion’s share of current revenue growth, the majority of revenue can be traced to fundamental operating segments. This means that if an AI bubble were to form and burst, Broadcom would be in a better position than Nvidia to weather the storm.
Broadcom is a major supplier of wireless chips and accessories used in next-generation smartphones. Wireless companies upgrading their networks to support 5G download speeds have increased demand for Broadcom’s products.
In addition, it offers cybersecurity solutions, supplies optical components for industrial equipment and has a portfolio of products used in next-generation vehicles. These are all segments that should grow steadily over time as vehicles become increasingly dependent on technology and demand for automated industrial equipment increases.
The other AI stocks Dalio and his team rounded up are specialists in customizable rack servers and storage solutions Super microcomputer(NASDAQ: SMCI). The 1,453,270 shares added during the quarter ended September increased Bridgewater’s position in Super Micro by 921%!
Super Micro, which completed a 10-to-1 forward split (also its first ever) after the close of trading on September 30, has experienced strong demand for its customizable rack servers. Companies eager to gain competitive advantages have willingly spent money on the infrastructure needed to build out their data centers, and Super Micro Computer has played a big role in that.
Additionally, Super Micro integrates Nvidia’s leading GPUs into its rack servers. The use of preferred hardware was the draw that helped more than double the company’s revenue in fiscal 2024 (ending June 30).
However, Super Micro Computer may not be the amazing value and growth story it seems at first glance. In late August, well-known short seller Hindenburg Research released a report alleging “accounting manipulation” at Super Micro. Since this report, an investigation into the company’s accounting practices has been opened by the Department of Justice The Wall Street Journal.
To make matters worse, accounting firm Ernst & Young, which had previously highlighted concerns about internal controls at Super Micro, resigned as the company’s auditor at the end of October. While this does not mean that Hindenburg’s accusations are correct, the optics of this situation are undeniably negative.
While Super Micro Computer appears well-positioned for success on paper, its stock is essentially off limits until it files its currently delayed annual report and sets aside these accounting questions.
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia:If you had invested $1,000 when we doubled in 2009,you would have $363,386!*
Apple: If you had invested $1,000 when we doubled in 2008, you would have $43,183!*
Netflix: If you had invested $1,000 when we doubled in 2004, you would have $456,807!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns November 18, 2024
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has and recommends positions in Berkshire Hathaway and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Billionaire Ray Dalio Sold 27% of Bridgewater’s Stake in Nvidia and Piles Into Two Artificial Intelligence (AI) Stock-Split Stocks was originally published by The Motley Fool
