Billionaires are selling Nvidia and buying these two stocks this year
For three decades, investors have waited patiently for the next great innovation to rival what the Internet has brought to corporate America. Artificial Intelligence (AI) could be the one right now.
Artificial intelligence allows software and systems to perform tasks that would normally be done by humans. The key to AI's seemingly endless potential is the ability of software and systems to learn without human intervention. This gives the technology applications in nearly every area of the U.S. and global economy.
While growth estimates vary, the most notable prediction comes from analysts at PwC, who believe AI could add an estimated $15.7 trillion to the global economy by the end of the decade. With sums this huge, it's no surprise that Wall Street's smartest and richest money managers are flocking to AI stocks.
But what might be surprising is that leading AI company Nvidia $NVDA-1.9%, which has gained nearly $3 trillion in market value since the start of 2023, has been one of the top selling candidates for more than half a dozen billionaire money managers.
Nvidia has been dismissed by several billionaire investors on Wall Street thanks to 13Fs filed quarterly with the Securities and Exchange Commission. In the March quarter, eight billionaires sold Nvidia stock - nine if you include the recently deceased Jim Simons of Renaissance Technologies.
Philippe Laffont of Coatue Management (29,370,600 shares) Ken Griffin of Citadel Advisors (24,627,160 shares) Israel Englander of Millennium Management (7,200,040 shares).
Which stocks, on the other hand, are overbought?
Philippe Laffont: PayPal $PYPL+1.9% (8,014,159 shares purchased)
PayPal
PYPLNvidia's biggest seller among billionaires was no doubt the leading financial technology stock (fintech) during the first quarter. Coatue Management reports in its 13F that the fund purchased more than 8 million shares of PayPal Holdings, which was worth nearly $539 million as of March 31.
Although competition among digital payment and peer-to-peer payment providers is growing, most of PayPal's important user metrics signal continued growth. Payment transactions rose 11% in the March quarter to 6.5 billion, while total payment volume maintained double-digit growth, excluding currency movements.
In addition, the company's active accounts are more engaged than ever. While growth in active accounts has stalled in recent quarters, average payments completed by active accounts over the past 12 months have risen from 40.9 at the end of 2020 to exactly 60 at the end of March 2024. Given that this is a largely usage-driven platform, higher engagement is a recipe for gross profit growth.
With Wall Street's consensus view of nearly 16% annual earnings growth through 2028, the forward P/E ratio is less than 13, making PayPal stock an interesting investment opportunity.
Ken Griffin: Bank of America $BAC+0.2% (22,434,948 shares purchased)
Bank of America
BACThe world's most profitable hedge fund since its inception, overseen by billionaire Ken Griffin, has decided to swap Nvidia stock for the proven financial institution Bank of America.
Among America's largest banks by assets, Bank of America is the most sensitive to changes in interest rates. The Federal Reserve's most aggressive rate hike since the early 1980s may not have been well received by lenders, but it was a godsend for lenders like BofA. The longer the central bank remains idle on interest rates, the more net interest income BofA and its peers can extract.
Bank of America also deserves credit for its technological prowess. While it may not be the first company that comes to mind when it comes to fintech innovation, BofA's digitization efforts are paying off. 76% of consumer households did everything online or through a mobile app in the first quarter, and exactly half of all loan sales were completed digitally. Digital transactions are significantly cheaper than in-person interactions and improve Bank of America's operational efficiency over time.
Disclaimer: You'll find plenty of inspiration on Bulios, but stock selection and portfolio construction is up to you, so always do a thorough analysis of your own.
Source: Yahoo Finance, CNBC.