Nvidia (NVDA 2.99%) and apple (AAPL -2.62%) is a very popular stock among retail and institutional investors, but two highly successful hedge fund managers actively bought one and sold the other in the third quarter.
Ken Griffin of Citadel Advisors bought 4.7 million shares of Nvidia, nearly tripling his stake. This is currently his third-largest position excluding options. He also sold 4.9 million Apple shares, reducing his holdings by 90%. This was his fourth-largest position, excluding options. Steven Cohen of Point72 Asset Management bought 1.5 million shares of Nvidia stock, increasing his holdings by 75%. This is currently his largest position, excluding options. During that time, he sold 1.5 million Apple shares, completely exiting his position.
Importantly, Griffin and Cohen rank among the most successful hedge fund managers in history, which makes them a good source of inspiration. However, investors should not buy or sell stocks without doing their research.
Nvidia: Stocks some hedge fund managers bought in Q3
Nvidia is an accelerated computing company best known for its graphics processing units (GPUs). The company has 98% market share in data center GPUs in terms of revenue and shipments. These chips are widely used to accelerate computationally complex workloads, such as training large language models and running artificial intelligence (AI) applications. In fact, Nvidia GPUs are the gold standard for AI computing.
But this company is truly scary because they build entire data centers. Complement the GPU with CPUs, interconnects, and networking gear. Nvidia has also created a robust ecosystem of development tools that allow programmers to create GPU-accelerated applications. This vertical integration has made the company “the world’s de facto AI enabler,” said Susquehanna analyst Chris Rowland.
Investors often think that NVIDIA’s stock price is overvalued, as its stock has risen 800% over the past two years. This period is defined by the huge demand for AI accelerators. However, the stock currently trades at a P/E ratio of 52x, at a discount compared to the January 2023 P/E multiple of 62x. Additionally, the current stock price is very reasonable considering that Wall Street believes NVIDIA’s earnings will grow at 38% per year over the next three years.
Long-term investors can feel comfortable buying this stock today. While the chances of another 800% return in the next 24 months are very slim and probably non-existent, Nvidia could still generate better returns than the S&P 500. (^GSPC -0.22%) Over the next five years. Personally, I think I’ll start with a small position today and buy more shares when the price drops.
Apple: Stocks sold by some hedge fund managers in the third quarter
Apple has built brand authority and pricing power through design expertise across hardware and software. The premium consumer electronics ecosystem offers a differentiated user experience and the company has gained a strong presence in several sectors. Most importantly, Apple is the market leader in smartphone sales and consistently ranks second in terms of shipments.
Apple also has service businesses that allow it to better monetize its large installed base, including the App Store, AppleCare, Apple Pay, iCloud storage, and subscription products. Although the company has a strong presence in several of these markets, its business units are also a major source of regulatory risk. For example, European law allows Apple to use third-party app stores on its devices.
Additionally, a federal judge recently ruled that Alphabet illegally stifled Internet search competition by paying default search engine placement fees to cell phone manufacturers. In fact, the Wall Street Journal reported that Alphabet paid Apple $20 billion in 2022, but that revenue (which falls under its services division) could disappear if the lawsuit is ultimately resolved. are.
Evaluation is also a concern. Apple’s stock price has nearly doubled over the past two years, driven solely by multiple business expansions rather than revenue growth. In fact, the company currently trades at a price-to-earnings ratio of 42x, which is double its price-to-earnings ratio of 21x at the beginning of 2023. It’s hard to justify this multiple when the company’s revenue is expected to grow at 10% annually over the next three years.
Personally, I think Apple stock is overvalued. The company has yet to demonstrate that it can monetize artificial intelligence, and its last major innovation to gain attention was AirPods in 2016. Potential investors should look elsewhere, and current shareholders should consider reducing their positions.
Suzanne Frey, an Alphabet executive, is a member of the Motley Fool’s board of directors. Trevor Jennewine has a position at Nvidia. The Motley Fool has positions in and recommends Alphabet, Apple, and Nvidia. The Motley Fool has a disclosure policy.