Susquehanna International’s Jeff Yass sent more than 52 million Nvidia shares to the chop block in the second quarter, favoring artificial intelligence (AI) networking stocks popular on Wall Street.
Earnings season begins in earnest. Over the course of about six weeks, most of America’s most important publicly traded companies will divulge information about their last quarter’s performance to Wall Street and investors.
Growth in corporate profits is essential to the success of a historically expensive stock market, but earnings season is not the only important data release that investors should monitor.
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August 14 is the filing deadline for institutional investors with at least $100 million in assets under management (AUM) to file Form 13F with the Securities and Exchange Commission. The filings give investors a snapshot of what Wall Street’s smartest and most successful asset managers bought and sold in the most recent quarter (in this case, Q2).
Admittedly, 13F has its drawbacks. Because they are filed up to 45 calendar days after the end of the quarter, they are likely to provide active hedge funds with outdated information. But despite this flaw, it can provide valuable clues about which stocks, industries, sectors and trends Wall Street’s biggest money managers are interested in.
Aside from Berkshire Hathaway CEO extraordinaire Warren Buffett, one of the most high-profile billionaire money managers is the co-founder and managing director of Susquehanna International Group. Mr. Jeff Yass.
Susquehanna had $537 billion in assets under management at the end of June, with thousands of holdings including various put and call options. But the most notable action in Susquehanna’s June-end quarter under 13F was what Yass and his team did in the artificial intelligence (AI) space.
Yas Susquehanna sells more than 52 million shares of NVIDIA
No publicly traded company is more responsible for driving Wall Street’s major stock indexes to new highs or powering the AI revolution than Nvidia. (NVDA 4.14%). Since the end of 2022, Nvidia’s market capitalization has soared from $360 billion to $3.39 trillion as of the closing bell on October 18th.
Even though Nvidia’s graphics processing units (GPUs) are the undisputed top choice for companies overseeing generative AI solutions and training large-scale language models, billionaire wealth managers Not all are optimistic about its future.
During the second quarter, Yas’ funds disposed of 52,497,275 shares of Nvidia stock, representing a 73% decrease in holdings compared to the quarter ended March. Please note that Nvidia completed a historic 10-for-1 forward stock split after the close of trading on June 7th, and the share numbers listed above have been adjusted for this split.
While profit-taking may be a viable and relatively benign explanation behind this sale activity, there are some clear indications that Susquehanna may have been forced to aggressively sell NVIDIA stock in the quarter ending June. There are some headwinds.
Topping the list of potential sell-side catalysts is historic. Since the advent of the Internet in the mid-1990s, we have seen many revolutionary technologies and innovations emerge. Many of these next big trends have provided spectacular addressable markets, but the only certainty is an early stage bubble bursting event.
For three decades, investors have repeatedly overestimated how quickly new technologies, innovations, and trends will be adopted and mainstreamed by consumers and businesses. When these high expectations inevitably go unmet, the music stops and the bubble bursts. Investors appear to be overestimating the usefulness of artificial intelligence in its early stages, as most companies lack a clear plan to monetize their AI investments and generate positive returns. . If the AI bubble bursts, Nvidia will likely be destroyed.
Regulators aren’t in NVIDIA’s favor either. The United States has restricted exports of the company’s high-performance AI GPUs to China, one of Nvidia’s highest-value markets.
Yas and his team may also be concerned about competitive pressures weighing on Nvidia’s pricing power and margins. In addition to external competitors bringing chips to market, Nvidia’s four most important customers by net revenue are all developing AI-GPUs for use in data centers. Nvidia’s AI-GPUs are backlogged and are significantly more expensive than these in-house chips, potentially costing Wall Street’s AI darlings future orders.
But while Susquehanna’s brightest minds, including Yas, were busy unloading their stake in Nvidia, they were undoubtedly jumping into another major company in the AI space.
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Yas joins a networking company promoting AI-powered data centers
Even though the Yas fund added more than 4,600 positions in the second quarter, what really stands out is Susquehanna’s significant addition to its existing stake in AI networking giant Broadcom. (AVGO 0.06%).
During the quarter ended June, Mr. Yas oversaw the purchase of 2,347,500 shares of Broadcom stock, increasing Susquehanna’s stock by 73% to 5,582,590 shares. Broadcom also completed a 10-for-1 stock split, which took place in mid-July.
There’s no question that artificial intelligence is a big reason Broadcom is expected to see 44% revenue growth this year. The company’s networking solutions are used by enterprises to connect tens of thousands of GPUs to maximize computing power and reduce tail latency. Broadcom’s solutions are essential for split-second decision-making that powers AI-driven software and systems.
If the AI bubble bursts, Broadcom’s stock price and business results are likely to suffer a downturn, but the major difference between NVIDIA and Broadcom is the revenue channel. While the overwhelming majority of Nvidia’s revenue and recent growth is related to AI hardware, AI still accounts for a small portion of Broadcom’s net revenue.
Broadcom’s biggest revenue driver has long been its ties to the global smartphone industry. We offer a wide selection of wireless chips and accessories used in next-generation smartphones. As wireless carriers expand 5G coverage, Broadcom has benefited from stable device replacement cycles.
In addition to being a notable player in smartphones, Broadcom’s other revenue channels include optical sensors used in industrial equipment and robotics, connectivity and LED solutions for next-generation vehicles, just to name a few. , develops cybersecurity solutions.
Based on this, the company’s management is not afraid to resort to occasional acquisitions to expand its business footprint and enhance cross-selling opportunities. Broadcom’s 2019 acquisition of Symantec’s enterprise security business opened the door to high-margin cybersecurity services, while its $69 billion acquisition of cloud-based virtualization software provider VMware in November 2023 This should strengthen the company’s private cloud and hybrid cloud strategies.
Broadcom’s more diverse portfolio of products and services appears to have been the lure that appealed to Jeff Yass, the billionaire co-founder of Susquehanna International.
