Nvidia (NVDA -0.05%) and apple (AAPL 0.01%) are two of the most popular stocks among retail investors, and the billionaires listed below bought one and sold the other in Q3.
Cliff Asness of AQR Capital Management bought 719,710 shares of Nvidia stock, increasing his stake by 5%. He also sold 102,651 Apple shares, reducing his position by 1%. Nvidia is currently the portfolio’s largest holding, with Apple the second largest. Steven Cohen of Point72 Asset Management bought 1.5 million shares of Nvidia stock, increasing his holdings by 75%. He also sold 1.5 million Apple shares, completely exiting his position. Importantly, NVIDIA is currently the portfolio’s largest holding, excluding option contracts.
Investors should pay close attention to Stephen Cohen’s trades. According to LCH Investments, Point72 ranks among the top 15 hedge funds in terms of net income since inception. That said, the above transactions took place in the third quarter that ended in September. So here’s what investors need to know about Nvidia and Apple now.
Nvidia: A stock that some billionaire-led hedge funds were buying.
Nvidia is the foundation of the artificial intelligence (AI) boom. Most investors are probably aware that Nvidia graphics processing units (GPUs) are used to accelerate data center workloads such as training machine learning models and running AI applications. . In fact, the company has more than 80% market share in AI accelerators, according to multiple analysts.
What investors may not know is that Nvidia’s dominance in the AI accelerator market is rooted not only in the superior performance of its chips, but also in the range of its CUDA software platform. CUDA includes hundreds of code libraries and pre-trained models that streamline AI application development across a variety of use cases, from recommender systems to autonomous robots.
That means competitors looking to counter Nvidia’s dominance will need more than just fast chips. We also need to build a robust software development ecosystem comparable to CUDA. But that’s easier said than done. Nvidia has been working on building the CUDA platform for the better part of two decades. As a result, the company is well-positioned to maintain its market leadership in AI accelerators.
Nvidia reported exceptional financial results in the third quarter of fiscal 2025. Revenues increased 94% to $35 billion, and non-GAAP net income increased 103% to $0.81 per diluted share. It was the sixth consecutive quarter that Nvidia reported triple-digit profit growth.
Looking ahead, Wall Street expects adjusted earnings to grow 50% over the next 12 months, so its current valuation of 54 times adjusted earnings looks relatively cheap. Prospective investors can confidently purchase small positions today. I think most analysts who follow Nvidia would agree. The median price target for the stock is $175 per share, implying a 25% upside from the current share price of $140.
Apple: A stock sold by some billionaire-led hedge funds
Apple has a significant competitive advantage in brand authority, which itself is the basis of its pricing power. For example, the average iPhone sold for more than $900 in the third quarter, while Samsung’s average Android smartphone sold for less than $300. Importantly, Apple is the market leader in smartphone sales and ranks second in smartphone shipments, according to Counterpoint Research.
Apple also has strong competitiveness in other consumer electronics areas. The company ranks 4th in personal computer (PC) shipments, 1st in smartwatch shipments, and 1st in tablet shipments. While Apple monetizes consumers on its devices, it also earns higher margin income by offering App Store downloads, iCloud storage, ancillary services like Apple Pay, and subscriptions like Apple TV+. .
Apple is a major player in several of these services markets. For example, the App Store is the top-ranked mobile app store by revenue, and its revenue is growing faster than its closest competitor, Alphabet’s Google Play Store. Additionally, Apple Pay is the most popular in-store mobile wallet among U.S. consumers.
Apple reported decent financial results for its fiscal fourth quarter of 2024, which ended in September, narrowly beating expectations for revenue and bottom line. Total sales rose 6% to $95 billion, with revenue from the two most important product categories, iPhone and services, up 6% and 12%, respectively. Meanwhile, non-GAAP earnings increased 12% to $1.64 per diluted share.
Looking ahead, Wall Street expects Apple’s adjusted earnings to rise 10% over the next 12 months. Based on this consensus estimate, the current valuation of 36 times adjusted earnings looks extremely expensive. These numbers give Apple a price-to-earnings (PEG) ratio of 3.6, making the stock much more expensive than Nvidia, which has a PEG of just over 1.
As such, I think prospective investors should avoid Apple right now, and current shareholders should consider cutting their significant positions.
Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Trevor Jennewine holds a position at Nvidia. The Motley Fool has positions in and recommends Alphabet, Apple, and Nvidia. The Motley Fool has a disclosure policy.
