Susquehanna International Group’s Jeff Yass is selling his stake in Nvidia and quietly building a position at its biggest competitor.
No other area is attracting more investment attention than artificial intelligence (AI) at the moment. For the past two years, the most lucrative opportunities in AI have been concentrated in a small group of giant tech stocks known as the Magnificent Seven. And among the Magnificent Seven, semiconductor favorite Nvidia has taken the lead.
On the surface, investing in Nvidia makes a lot of sense if you want exposure to AI. But smart investors understand that the most obvious opportunity doesn’t necessarily make the smartest investment.
Take Jeff Yass, for example. The billionaire co-founder of Susquehanna International Group (SIG) has been selling his stake in Nvidia over the last year while acquiring a number of other companies in the chip space.
Let’s take a look at what Yas did last year and assess why his decision to raise SIG’s stake against NVIDIA’s biggest competitor is a good idea.
A detailed look at Susquehanna’s semiconductor-related trends
Thanks to a nifty tool called 13F filings, investors can find an itemized breakdown of all the buys and sells that institutional investors make on a quarterly basis. We detailed some of SIG’s activity in major chip stocks over the last year. All numbers represent millions of shares.
Corporate Q3 2023 Q4 2023 Q2 2024 Q3 2024 Nvidia 43.6 31.9 72.0 19.5 13.9 Advanced Micro Devices 1.9 1.3 2.0 1.4 2.9 Micron Technology 1.0 1.7 1.3 4.8 6.9 Taiwan Semiconductor 4.4 2.7 3.5 2.0 1.5 Intel 4.6 2.9 7.6 7.4 9.9 Broadcom 4.0 3.7 3.2 5.6 1.3
Data source: HedgeFollow. Table by author. Note: All numbers represent millions of shares.
The main takeaway from this dataset is that SIG significantly increased its position in Advanced Micro Devices over the last year while reducing its positions in Nvidia, Taiwan Semiconductor Manufacturing, and Broadcom. (AMD 1.37%)Micron Technology, Intel.
NVDA data by YCharts
This chart shows that from Q3 2023 to Q3 2024, the three best-performing stocks in this industry’s semiconductor business are Nvidia, Broadcom, and Taiwan Semiconductor. Mr. Yas has reduced positions in all of these stocks. Last 12 months.
Why AMD looks attractive right now
To me, it looks like SIG is starting to take profits from companies that have outperformed their competitors and reinvest the profits into new opportunities in the chip industry. And from my perspective, AMD looks like the most attractive alternative to Nvidia at the moment.
A major reason why Nvidia’s stock price has risen so explosively over the past few years is because the company got an early start in the graphics processing unit (GPU) market. GPUs are critical hardware used for generative AI development. Considering the lack of competition, Nvidia has been able to establish a dominant market presence in the GPU space.
However, this dynamic is slowly changing and I think many investors are still not fully aware of the concept. For the quarter ending September 30, AMD had revenue of $6.8 billion, an 18% increase from the same period last year. By comparison, Nvidia’s third-quarter revenue was $35.1 billion, up 94% year-over-year.
It’s safe to say that AMD’s growth and scale isn’t even in the same world as Nvidia’s growth. However, there are nuances worth pointing out that I think lend credence to the idea that AMD could be standing on the precipice of something huge.
AMD’s total revenue only increased by 18%, but revenue from the company’s data center business increased by 122%. This is because data center revenue is AMD’s largest source of business, and this growth level is about the same as Nvidia’s data center operations (currently growing at 112% annually). It’s important.
Given that AMD has a slew of new GPUs scheduled to start shipping in 2025 and 2026, I think there’s a good chance the company will start competing more aggressively with Nvidia, especially when it comes to price.
As such, I wouldn’t be surprised if demand trends start to drift toward AMD as companies look to augment their existing Nvidia stacks with alternative (i.e. cheaper) options capable of high-performance computing.
Image source: Getty Images.
Is AMD a good stock to buy now?
Currently, AMD’s forward price/earnings (P/E) ratio is 27.8 times, which is significantly lower than Nvidia’s forward P/E ratio of 33.7 times.
On the surface, Nvidia’s premium appears to be justified. The company is much larger than AMD and is growing at a much more accelerated rate. Plus, with Nvidia’s next-generation Blackwell GPUs coming soon, it looks like no one will be able to keep up.
But as mentioned earlier, AMD’s data center GPU business is actually growing at a similar pace to Nvidia’s business. Additionally, the company has a new line of GPUs specifically focused on competing with Blackwell. Even though AMD’s products come to market later than Nvidia’s, I wouldn’t call this company inferior.
Nevertheless, the market seems to be downplaying the prospects of AMD’s rival GPUs and the impact it will have on the company’s growth. To me, AMD is sneakily undervalued and looks like an attractive buy-and-hold opportunity before new chipsets start hitting the market next year.
Adam Spatacco holds a position at Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: February 2025 $27 short calls on Intel. The Motley Fool has a disclosure policy.
