Wall Street Billionaire Investors Dumped Nvidia Shares in Q1, Bought These Three Stocks Instead

According to a PriceWaterhouseCoopers study, AI could contribute over $15.7 trillion to the global economy at the end of the decade, where $6.6 trillion is estimated to come from enhanced productivity and $9.1 trillion from consumption-side effects.

AI's ability to learn without human intervention and eliminate redundant tasks has driven high demand for the technology across industries, benefitting both software developers and chip makers. With a market cap of $3 trillion, Nvidia has led the AI boom and the stock market rally. It continues to aggressively build AI factories, Blackwell chips, and data centres to match growing demand.

AI's potential to transform our lives and the global economy encouraged many of Wall Street's best and wealthiest fund managers to invest heavily in AI stocks. However, over eight billionaire fund managers, including Philippe Laffont of Coatue Management, Ken Griffin of Citadel Advisors, Israel Englander of Millennium Management, David Tepper of Appaloosa Management, and Steven Cohen of Point72 Asset Management, collectively sold millions of Nvidia shares for the March-ended quarter, according to their company 13F filings.

The top Nvidia sellers were Philippe Laffont, Ken Griffin, and Israel Englander. Laffont offloaded over 2,93 million shares. Meanwhile, Griffin and Englander sold over 2.46 million and 720,000 shares, respectively, in Q1. The figures are not adjusted for Nvidia's 10-for-1 stock split in June.

Profit-taking and Stiff Competition Are Leading Factors Driving The Selloff

The Nvidia stock has returned over 2,900% in the last five years and over 160% year-to-date (YTD) to close at $126.36 on July 16. Realising stock profits after returning massive gains in a relatively short span could have driven the Nvidia selloff by billionaire investors and the recent price correction that wiped out over $400 billion of the company's market value in a few days.

The company's graphics processing units (GPUs) comprise 90% of all AI-enabled GPUs deployed in hyper-scale data centres overseeing GenAI solutions and training large language models. Despite a strong balance sheet and high demand for its GPUs, Nvidia faces several other headwinds.

Its rival Advanced Micro Devices is doubling down on production of the MI300X GPU for data centres. Meanwhile, Intel is preparing to roll out the Gaudi 3 AI-accelerating chip in the current quarter. Some of Nvidia's top customers are also building in-house AI GPUs.

Even if Nvidia manages to retain its market lead, the availability of more chips from other providers will eventually reduce data centre space for its hardware. No technology trend or innovation escaped an early-stage bubble in the last three decades, as investors always overestimate the potential of new technologies. An AI bubble burst could significantly hurt Nvidia. While several Wall Street billionaires offloaded Nvidia shares, they increased their stakes in several value stocks.

Coatue Founder Philippe Laffont Bought Over 8 Million Shares of PayPal Holdings

Coatue Management founder Philippe Laffont, who sold nearly three million Nvidia shares in Q1, bought 8.01 million PayPal shares worth $539 million during the quarter, according to his firm's 13F filings.

The fintech's payment transactions jumped 11% for the March-ended quarter to 6.5 billion as payment volumes retained a double-digit growth rate despite increasing competition among peer-to-peer payment providers. The company posted net revenue growth of 9% year-over-year (YoY) to $7.7 billion and free cash flow of $1.8 billion.

Despite a slump in active account growth, the average payments completed by active accounts over the trailing 12-month duration have markedly increased in the new decade. The stock continues to hover above $61 apiece. PayPal's price-to-earnings (P/E) ratio as of July 16 was 15.57, much lower than that of its peers, such as Mastercard at 35.26 and Visa at 30.08.

Paypal shares have lost most of their value over the past five years but have steadily climbed in 2024. CEO Alex Chriss is focusing on execution and approaching 2024 as a transition year. A cheap valuation and a Wall Street consensus of 16% annualised earnings growth through 2028 could make PayPal a value buy.

Citadel Founder Ken Griffin Purchases Over 22.43 Million Bank of America Shares

Citadel founder and CEO Ken Griffin has a net worth of $38.4 billion. His firm is one of the most profitable hedge funds, having generated nearly $74 billion in gains since inception in 1990. Citadel manages assets worth over $100 billion. According to 13F filings, his firm bought 22.43 million Bank of America (BofA) shares in Q1. For Q2 2024, BofA posted a 1% YoY growth in revenue, net of interest expense, to $25.4 billion, driven by higher asset management and investment banking fees.

BofA's net quarterly revenue was $6.9 billion, mainly from its consumer and global banking segments. Its digital banking efforts also bring results, as 77% of households actively use its digital banking platforms. Growing digital transactions will gradually improve BofA's operational efficiency and reduce overheads since digital payments are cheaper than in-person banking.

BofA has been consistently increasing its provisions for credit losses, which stood at $1.5 billion in the quarter. Wall Street banks face higher capital reserve requirements risks due to the Basel 3 Endgame rules, prompting banks like JPMorgan to charge fees for having a bank account.

However, BofA's stock price has climbed 30% YTD and 50% in the past year to close at $44.13 after the latest trading session. Its P/E ratio has risen consistently to 15.27 as of July 16, but the stock is still cheaper than peers like Citigroup. BofA returned $5.4 billion to shareholders during the quarter, of which $1.9 billion was through dividend payouts.

Millennium Management Founder Israel Englander Scooped Up Over 4 Million Merck Shares

According to Forbes, Millennium Management founder Israel Englander has a net worth of $12.4 billion. His company manages a $58 billion portfolio and bought 4.02 million shares of pharma company Merck in Q1.

Merck is renowned for its leading antibody, Keytruda, which is used in cancer immunotherapy to treat various forms of cancer. Keytruda sales jumped 20% YoY to $6.94 billion as solid pricing power and better cancer-screening diagnostics have placed it on track for annual run-rate revenue of $28 billion.

The company also secured several regulatory approvals and reached clinical milestones for drugs that treat cancers and cardiometabolic diseases. Merck also acquired Harpoon to expand its oncology pipeline and also inked a deal to purchase the aqua business of Elanco Animal Health Incorporated. The company's Animal Health business is an underrated segment. It focuses on products to keep livestock healthy and for the well-being of pets. The pet animal health division has been a consistent source of revenue for Merck.

In 2024, the stock price has climbed over 10% YTD to close at $125.44 yesterday. As overall quarterly revenue jumped 9% YoY to $15.75 billion, the company management upgraded its full-year 2024 sales guidance to up to $64.3 billion.

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