At this point in the artificial intelligence (AI) story, should I buy or sell Nvidia (NVDA 1.56%)? That question has been crossing the minds of many investors in recent times. And for good reason. On one hand, Nvidia dominates the AI market and has established an impressive track record of revenue growth. On the other hand, the company faces certain challenges these days, such as controls on chip exports to China and growing competition, that could weigh on growth moving forward.
At times like these, it's interesting to take a look at what expert investors are doing. Though you may not follow their moves to the letter, they may offer you a bit of guidance or inspiration. In this case, let's look at something billionaire investor Ole Andreas Halvorsen did in the fourth quarter of last year.
As disclosed on his 13F form -- a required filing for mangers of more than $100 million in securities -- Halvorsen significantly cut his position in Nvidia and loaded up on a big Nvidia AI customer. And this customer also happens to be the cheapest Magnificent Seven stock right now. Let's find out more.
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A manager of $30 billion
Before we get to that, let's consider a bit of background on this top investor. Earlier in his career, Halvorsen worked for Tiger Management, one of the world's first hedge funds and one that grew to be the second biggest. He then moved on to open his own fund, Viking Global Investors, a firm that now manages more than $30 billion in securities.
Halvorsen's biggest holdings today revolve primarily around financials, with JPMorgan Chase & Co. being the No. 1 position. But the top investor also has a number of technology stocks in his portfolio, including Nvidia.
Now, let's consider his recent move. Halvorsen cut his position in Nvidia by 10%, which leaves him with 2,031,985 shares. Nvidia currently represents 0.8% of his portfolio, down from 1%.
At the same time, Halvorsen increased his stake in Nvidia customer Alphabet (GOOGL 0.42%) (GOOG 0.56%) by 186% and now holds 3,661,375 shares. Alphabet today accounts for 2.2% of the portfolio, up from 0.7%.
You probably know Alphabet best thanks to something you might have just used a few minutes ago: Google Search. The company owns this popular platform -- the world's most used search engine -- and generates most of its revenue from advertising across Google. This has brought in billions of dollars in revenue year after year.
A key player in AI
But Alphabet also is a key player in AI. The company's Google Cloud offers a wide variety of AI products and services to customers, something that has boosted an already booming business. In the most recent quarter, Google Cloud revenue advanced in the double digits to $12 billion on high demand for AI infrastructure and generative AI products.
Nvidia doesn't release a list of its biggest customers, but Alphabet is known to be one of them. The company offers Nvidia's top performing graphics processing units (GPUs) -- chips that power key AI tasks -- to customers through its cloud unit.
For an investor, this means buying shares of Alphabet allows you to bet on the successes of Nvidia, but it also offers you access to other growth drivers. For example, Alphabet may benefit in the coming quarters from growth at its Search business as its own large language model, Gemini, improves the search experience for users and leads to better results for advertisers. Alphabet is also going all in on AI and plans to spend $75 billion this year to support efforts toward areas including servers, data centers, and networking. This positions Alphabet to gain from the next wave of AI growth, as customers apply the technology to everyday problems.
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Key Data Points
A bargain stock to buy
Meanwhile, Alphabet today, trading at 17 times forward earnings estimates, is the cheapest of the Magnificent Seven, a group of tech stocks that led market gains last year.
We don't know the reasons behind Halvorsen's recent portfolio moves, but he likely still believes Nvidia has room to run as he held onto some shares, and he may even view his Alphabet purchase as another way to bet on Nvidia. Though Nvidia may face some headwinds today, there still are plenty of reasons to be optimistic about this player's future.
It's also clear that Halvorsen sees untapped potential in Alphabet itself as the AI story continues. All of this suggests Nvidia and Alphabet could be reasonable bets for a long-term investor right now. But considering Alphabet's dirt cheap valuation and the company's planned investments in AI growth, now may be a particularly good moment to follow billionaire Halvorsen and pick up shares of this current and future AI winner.
