Two of Wall Street’s fastest-rising artificial intelligence (AI) stocks were sent to the chopping block in the quarter that ended in June, with Mr. Englander favoring stocks of polarizing AI companies instead.
In mid-August, Wall Street received the most important data dump of the third quarter — and I’m not talking about the inflation report from the Bureau of Labor Statistics.
August 14 is the deadline for institutional investors and asset managers with at least $100 million in assets under management to file Form 13F with the Securities and Exchange Commission. 13F provides inside information on which stocks Wall Street’s smartest and most successful money managers bought and sold in the most recent quarter (in this example, the quarter ending in June).
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Although 13Fs have their downsides, such as the fact that active fund data can become stale since they are typically filed 45 days ago, it is important to know which stocks, industries, sectors, and This is extremely valuable in understanding the specificity of a stock. The move has caught the attention of Wall Street’s top asset managers.
The billionaire Israeli-English man behind Millennium Management is one of the prominent asset managers that investors are paying close attention to. Based on Millennium’s latest 13F, Englander and his team oversee nearly $216 billion in securities under management, spanning thousands of positions, including various put and call options.
But what stands out most about Mr. Englander’s trading activity in the quarter ended June is how he approached artificial intelligence (AI) stocks. Mr. Englander absolutely jumped into another historically undervalued AI company facing serious headwinds, while showing shares of two of Wall Street’s most popular AI stocks on his doorstep.
Englanders Millennium sends Nvidia and Palantir shares to chop block
The two super popular artificial intelligence stocks in question that Englanders Millennium Management cut in price in the second quarter are semiconductor giant NVIDIA. (NVDA 2.59%) and cloud-based data mining specialist Palantir Technologies (PLTR 0.48%).
Millennium has owned shares in Nvidia since 2008, so it’s arguably the biggest beneficiary of the AI revolution. However, during the quarter ended June, Englander’s fund reduced its position in Nvidia by 676,242 shares.
Indeed, this could be nothing more than simple profit taking and reallocation of assets. Nvidia has grown from a $360 billion company by the end of 2022 to a $3.25 trillion company as of the closing price on October 9, 2024. Locking in profits after an almost parabolic rally seems like a wise move.
But there are other concerns that may force Mr. Englander to write down Millennium’s stake in Nvidia. For example, Nvidia’s AI graphics processing units (GPUs) are the undisputed top choice for the “brains” of AI-powered data centers, but external and internal competition is increasing. Notably, Nvidia’s four largest customers by revenue are developing AI-GPUs in-house for use in their data centers. This suggests limited future opportunities for AI hardware kingpins to acquire valuable data center real estate.
History has also been incredibly unkind to companies leading the next big innovations. Investors have been overestimating the utility and pervasiveness of all innovative technologies for the past 30 years, and it seems unlikely that AI will be an exception to this unwritten rule.
In addition to selling the Nvidia stock, Mr. Englander’s fund reduced its holdings in Palantir Technologies by 7,074,815 shares. Millennium has held Palantir shares since its initial public offering in 2020.
Meanwhile, Palantir is riding an irreplaceable wave and making astronomical profits. The company’s AI-powered Gotham platform, which collects data and supports federal mission planning, combined with its enterprise-focused Foundry platform, leaves no large-scale competitor. Wall Street often gives premium valuations to companies with sustainable moats.
But even with a sustainable moat, at some point a nosebleed valuation can be a tough pill to swallow. As of Oct. 9, Palantir was valued at 100 times forward earnings per share (EPS) and an astonishing 35 times expected sales for the current fiscal year. It’s almost impossible to justify this valuation, considering annual sales growth of around 20%.
Additionally, the long-term potential of Palantir’s Gotham division is understandably limited. This is a platform that Palantir leadership grants access to only to the United States and its allies. This means that future growth and profits will be highly dependent on the foundry. That’s not a bad thing, but Foundry is still in the early stages of expansion, making Palantir’s $96.6 billion market cap an eyesore.
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Here are the historically cheap AI stocks that Israelis and English people can’t stop buying.
While Mr. Englander has been a busy seller of two of Wall Street’s top artificial intelligence stocks, he has also been an avid buyer of shockingly cheap AI stocks whose prospects have become uncertain in recent months. We’re talking about Super Micro Computer, a specialist in customizable rack server and storage solutions. (SMCI -1.02%).
Adjusting for a 10-for-1 stock split that Supermicro completed two weeks ago, Englanders Millennium Management bought 5,533,230 shares in the second quarter, increasing the fund’s existing stake in the company by more than 80% since the end of March. increased.
Just as Nvidia has become the go-to provider of AI-GPUs for high-computing data centers, Super Micro Computer continues to be a top infrastructure player for companies looking to build AI data centers. I am. Super Micro incorporates Nvidia’s highly popular H100 GPU into a customizable rack server, making its solution even more appealing.
In fiscal year 2024, which ended June 30, the company’s net sales increased 110% to $14.94 billion. The midpoint of Super Micro’s 2025 revenue forecast is $28 billion. The company’s stock currently trades at less than 11 times FY2026 EPS, despite expected annual earnings growth of 62% through FY2029.
The reason Super Micro Computer’s stock isn’t trading at a more aggressive premium, despite its high growth forecast, is because of growing headwinds. For example, it was the subject of a short interest report released by Hindenburg Research in late August. Mr. Hindenburg alleged “accounting manipulation” at Supermicro. The company has denied the allegations, but it has also delayed filing annual reports and is reportedly facing an early-stage investigation by the U.S. Department of Justice.
There are also concerns that the supply chain could impede the supermicrocomputer’s ability to meet customer needs. Demand for Nvidia’s H100 GPUs is so high that Super Micro’s rack servers could fall victim to backlogs.
Suffice it to say that despite being relatively inexpensive, the super microcomputer was a risky bet for Englander and Millennium Management.
