Nvidia (NVDA 1.80%) is ideally positioned to be a major player in the market for physical artificial intelligence (AI), a technology that lets autonomous machines such as cars and robots understand, navigate, and interact with the real world. Nevertheless, certain hedge fund billionaires sold shares in the first quarter:
- David Tepper at Appaloosa sold 380,000 shares of Nvidia, reducing his position 56%.
- Steven Schonfeld at Schonfeld Strategic Advisors sold 901,900 shares of Nvidia, cutting his stake 72%.
Meanwhile, those same hedge fund managers, and others, bought Uber Technologies (UBER 2.08%), a company well positioned to benefit from robotaxis and whose stock has soared 300% in the past three years.
- David Tepper added 1.7 million shares of Uber, upping his stake 113%. It ranks among his top 10 holdings.
- Steven Schonfeld added 50,400 shares of Uber, upping his stake 7%. It ranks among his top 30 holdings.
- Bill Ackman at Pershing Square Capital added 30.3 million shares of Uber, starting a new position that now ranks as his largest holding.
More broadly, recently filed Forms 13F show that the number of large institutional investors (i.e., those with at least $100 million in securities) holding Nvidia declined 2% sequentially in the first quarter. Meanwhile, the number of large asset managers holding Uber increased 8%. Read on to learn more about these stocks.
1. Nvidia
Nvidia is the market leader in data center graphics processing units (GPUs), chips that are the industry standard in accelerating complex workloads such as training machine learning models and running artificial intelligence (AI) applications. Importantly, Nvidia holds more than 90% of the market in data center GPUs, and the market is forecast to grow at 28% annually through 2030.
Nvidia has also developed a robust software platform called CUDA. It comprises developer tools such as code libraries, frameworks, and pretrained models that streamline the building of AI applications across multiple disciplines. For instance, Nvidia Drive is a platform for autonomous vehicles, and Nvidia Isaac supports autonomous robots.
In short, Nvidia brings together the data center systems, software development tools, and embedded systems (i.e., onboard computers that power autonomous cars and robots). That vertical integration is an advantage, because it lets Nvidia design systems with the lowest total cost of ownership, and developers need not waste time integrating products from multiple vendors.
Looking ahead, Wall Street estimates Nvidia's earnings will increase at 28% annually over the next three years. That consensus makes the current valuation of 46 times earnings look fair. So why did certain hedge funds sell the stock in the first quarter? Profit-taking probably contributed, but I suspect they were also worried about exports controls and DeepSeek.
However, while the Trump administration has restricted the export of H20 GPUs to China, it also revoked the Biden-era AI Diffusion Rule that would have limited sales to dozens of countries. And while the cost efficiencies DeepSeek achieved could hurt demand for Nvidia GPUs, many experts expect the opposite. Lower costs will make AI accessible to more companies, which should more than offset any decrease in demand.
Image source: Waymo.
2. Uber Technologies
Uber leads the U.S. ride-sharing market with a 76% share, according to Bloomberg. It also ranks second in the restaurant food delivery market, with a 24% share. The company is also the market leader in ride-sharing services in nine other countries, and the market leader in food-delivery services in eight countries.
Here's the two-part investment thesis for Uber: First, the company should be able to grow its market share in ride-sharing and food-delivery services as consumers lean into new product categories such as grocery and retail, and the Uber One membership program. In addition, advertising revenue should keep growing steadily as Uber collects more consumer data.
Second, Uber is ideally positioned to serve as a demand aggregator for autonomous ride-sharing companies. The company values the U.S. market alone at $1 trillion, and CEO Dana Khosrowshahi recently told analysts, "Uber can deliver the lowest operational costs for our [autonomous vehicle] partners because we are leaps and bounds ahead on every aspect of the go-to-market capabilities."
Importantly, Uber is already involved with several autonomous ride-sharing companies, including Alphabet's Waymo in Phoenix; Austin, Texas; and, soon, Atlanta. Uber also works with WeRide in Abu Dhabi and, soon, Dubai, and it plans to add 15 more cities in the next five years. Similarly, May Mobility plans to deploy thousands of robotaxis on Uber in the next few years, with an initial launch in Arlington, Texas, slated for late 2025.
Uber stock currently trades at 15 times earnings, a discount to the one-year average of 40 times earnings. The present valuation looks quite reasonable for a company whose earnings are forecast to grow at 25% annually over the next three years. Patient investors should feel comfortable buying a small position today.
