Nvidia (NVDA 2.94%) shares have advanced 180% since January 2024 amid incredible demand for its artificial intelligence platforms. But billionaire Israel Englander, CEO of hedge fund Millennium Management, sold down his position in the fourth quarter, while buying shares of AppLovin (APP 1.16%), an AI stock up 1,180% since January 2024.
- Englander sold 1.1 million shares of Nvidia, reducing his position by 10%. Nvidia is still the fifth-largest position in his portfolio excluding options contracts.
- Englander bought 808,973 shares of AppLovin, increasing his position by 114%. AppLovin now ranks among the 20 largest positions in his hedge fund excluding options.
Englander is a good source of inspiration for investors because Millennium Management is the third most successful hedge fund in history as measured by net gains since inception, according to LCH Investment. Read on to learn more about Nvidia and AppLovin.
NASDAQ: NVDA
Key Data Points
Nvidia: The stock Israel Englander sold in the fourth quarter
Nvidia specializes in accelerated computing, a discipline that combines specialized hardware and software to speed up difficult data center workloads like artificial intelligence (AI). While the company is best known for graphics processing units (GPUs), chips often called AI accelerators, Nvidia is particularly formidable because it participates in so many parts of the AI economy.
Susquehanna estimates Nvidia has 84% market share in AI accelerators, but the company complements its GPUs with adjacent hardware like central processing units and networking platforms. In fact, Morningstar estimates Nvidia has over 50% market share in networking gear used for generative AI workloads, and expects the company to maintain its leadership through at least 2028.
Nvidia reported impressive financial results in the third quarter of fiscal 2025, which ended in October, beating estimates on the top and bottom lines. Revenue increased 94% to $35 billion and non-GAAP net income surged 103% to $0.81 per diluted share, marking the sixth consecutive quarter in which the company reported triple-digit earnings growth.
Nvidia has an important catalyst in the recent launch of its Blackwell GPU, which handles AI training up to four times faster and AI inference up to 30 times faster than its previous Hopper GPU. CEO Jensen Huang told shareholders last year, "The Blackwell architecture platform will likely be the most successful product in our history and even in the entire computer history."
Wall Street expects Nvidia's adjusted earnings to increase at 39% annually through fiscal 2027, which ends in January 2027. That makes the current valuation of 53 times adjusted earnings look quite reasonable, which begs the question: Why did Englander sell shares in the fourth quarter? I suspect he was simply moving money to address other opportunities. I doubt he has lost confidence in Nvidia when the stock is still the fifth-largest holding in his hedge fund apart from options contracts.
NASDAQ: APP
Key Data Points
AppLovin: The stock Israel Englander bought in the fourth quarter
AppLovin provides ad tech software that help mobile developers market and monetize their applications. The company also provides tools that serve the same purpose for connected TV (CTV) publishers, and it recently introduced an e-commerce marketing product that lets brands reach consumers through mobile advertising.
AppLovin has distinguished itself with Axon, a machine learning algorithm that targets ad content in a highly effective manner. Several years ago, it began acquiring game studios to train Axon, and it launched a more sophisticated version called Axon 2.0 in 2023. Improved recommendation capabilities led to an increase in advertisers spending, which has translated into strong financial performances in recent quarters.
AppLovin reported fourth-quarter financial results that crushed Wall Street's estimates on the top and bottom lines. Revenue rose 44% to $1.4 billion and GAAP earnings surged 253% to $0.49 per diluted share. "During the quarter, our advertising business continued to drive increased performance for our mobile gaming partners, combined with positive early results for e-commerce advertisers during the holiday season," said CFO Matt Stumpf.
Importantly, AppLovin also announced plans to sell its game development studios for $900 million. That will benefit the company in two ways. First, revenue from its apps actually fell in the most recent quarter, so the divestiture will eliminate the weakest part of the business. Second, it will streamline operations by allowing AppLovin to focus solely on its ad tech software, including its nascent e-commerce product.
Wall Street estimates AppLovin's earnings will increase at 42% annually through 2026. That makes the current valuation of 112 times earnings look relatively expensive. But among the 30 analysts that follow AppLovin, the median target price is $538 per share. That implies 5% upside from the current share price of $510. Even so, investors that buy shares today should keep their positions small given the elevated valuation.
