Citadel’s Ken Griffin sold his Nvidia stake and bought up shares in emerging data analytics software companies.
It often takes a lot of effort to get a solid assessment of an investment, including sifting through investor presentations and company filings, listening to earnings calls, and watching interviews.
One of the things I like to do is analyze 13F filings, which are filings by investment firms that manage over $100 million in stocks. One of the most well-known hedge funds is Ken Griffin’s Citadel. Citadel reduced its stake in NVIDIA last quarter. (NVDA -1.59%) The company increased its stake in Palantir Technologies by 1,140%, selling 9,282,018 shares. (supplement 1.00%)5,222,682 shares were acquired.
Let’s dig into why Griffin and his portfolio managers sold Nvidia and bought Palantir, what the catalysts are that will drive Palantir’s further growth, and why now is the perfect time to follow Griffin’s lead.
Why sell Nvidia now?
On the surface, selling Nvidia shares might seem like a questionable move — after all, isn’t artificial intelligence (AI) the next big thing?
Well, even if AI has become the generational opportunity that it is being touted to be, at face value it doesn’t mean much. There are many components to the foundation of AI, and Nvidia’s expertise in developing advanced chipsets called graphics processing units (GPUs) is just one of the many building blocks that underpin artificial intelligence.
The biggest bearish argument for Nvidia comes from increasing competition. Currently, products developed by Advanced Micro Devices and Intel are the most obvious alternatives to Nvidia. But I see a bigger risk in the competitive environment.
Specifically, NVIDIA’s leading technology companies, including Tesla, Meta Platform, Microsoft, and Amazon, are all investing heavily in their own hardware development. Given that many of these companies are NVIDIA customers, it is questionable whether the company’s current growth trajectory is sustainable in the long term.
As more GPUs hit the market, the technology will likely become somewhat commoditized, a trend that will likely drive down prices for Nvidia, resulting in slowing revenues, margins, and profits.
Ultimately, I don’t really blame Griffin for selling most of his NVIDIA shares — the company has been successful so far, but its future prospects are in doubt.
Image source: Getty Images.
Why Buy Palantir Now?
Elsewhere in the AI industry, enterprise software company Palantir offers four data analytics platforms: Foundry, Gotham, Apollo and AIP. Its software is used for a variety of use cases in the US military and private sector.
PLTR Revenue (Quarterly) Data by YCharts
Investors have seen Palantir’s revenues accelerate over the past few years on the back of bullish views on AI, and more importantly, the company’s operating leverage has improved dramatically in the form of expanding margins and stable profitability.
Earlier this month, Palantir also achieved the notable milestone of being added to the S&P 500.
Should you buy Palantir stock now?
I can’t say for sure why Griffin increased his stake in Palantir so much last quarter, but I find the timing interesting for one particular reason: Palantir had been in the S&P 500 before, but wasn’t initially included. Perhaps some believed Palantir’s new growth was just growing demand for AI software that wasn’t sustainable in the long term.
Either way, long-time followers of Palantir know that the company’s long-term prospects are strong, regardless of the current state of AI. With that in mind, it’s reasonable to think the company will eventually be included in the S&P 500.
Putting this in perspective, now that Palantir is in the S&P 500, more investment banks and research analysts will likely start tracking the company more closely. This could result in increased institutional purchases of the company’s shares. Over time, this could strengthen Palantir’s brand and recognition in the investment community, further driving up its stock price.
I think it’s likely that Palantir’s holdings will increase among institutional investors. The company has been rapidly emerging in the AI software space, attracting companies like Microsoft and Oracle. I believe these relationships will provide further growth for the company.
I believe Palantir’s future is even better, and I think now is a great time to buy shares. I view Griffin’s swap of NVIDIA for Palantir as an especially smart move, as there are a number of factors driving the company’s rise.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Spatacco owns shares of Amazon, Meta Platforms, Microsoft, NVIDIA, Palantir Technologies, and Tesla. The Motley Fool owns shares of and recommends Advanced Micro Devices, Amazon, Meta Platforms, Microsoft, NVIDIA, Oracle, Palantir Technologies, and Tesla. The Motley Fool recommends Intel and recommends the following: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.
