You might not realize it, but one of the most important data releases of the entire quarter took place last week. Feb. 17 marked the filing deadline for institutional investors with at least $100 million in assets under management to file Form 13F with the Securities and Exchange Commission (SEC).
A 13F provides a concise snapshot of the stocks Wall Street's savviest money managers, including high-profile billionaire investors, bought and sold in the latest quarter (i.e., the fourth quarter). Although artificial intelligence (AI) stocks have played a key role in lifting Wall Street to new heights, 13Fs show that select billionaire fund managers were active sellers of Nvidia (NVDA 1.53%) stock ahead of its fourth-quarter earnings report.
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Four billionaires sent shares of AI titan Nvidia to the chopping block
According to 13Fs filed with the SEC, four high-profile billionaire investors pared down their exposure to Nvidia during the fourth quarter, including:
- Israel Englander of Millennium Management: 3,038,895 shares sold
- Chase Coleman of Tiger Global Management: 698,000 shares sold
- Philippe Laffont of Coatue Management: 667,405 shares sold
- David Tepper of Appaloosa: 200,000 shares sold
Some of this selling may be nothing more than profit-taking. Since the start of 2023, shares of Nvidia have rallied nearly 1,200%, with the company's graphics processing units (GPUs) commanding top dollar in AI-accelerated data centers. All four of these billionaire money managers are fairly active in adding to or reducing existing positions.
Furthermore, Englander's Millennium Management typically hedges its common stock positions with various put and call options. It's perfectly normal for common stock holdings to ebb and flow in Millennium's portfolio.
However, profit-taking may not tell the whole story.
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Do billionaire investors know something about Nvidia that Wall Street doesn't?
Although most Wall Street analysts and investors expect Nvidia to, once again, blow past consensus sales and profit expectations when it reports its fiscal fourth-quarter earnings results on Feb. 25, there are potential headwinds to be aware of.
To begin with, competitive pressures are building. Even though Nvidia's GPUs have maintained their compute superiority, external rivals have begun ramping up GPU production.
More importantly, internal competition is a total wildcard. Many of Nvidia's top customers by net sales are developing GPUs and AI solutions for internal data center use. While Nvidia did just extend a multi-year partnership with Meta Platforms to supply the social media goliath with its Blackwell and Vera Rubin GPUs, this internal competition threatens to reduce the AI GPU scarcity that's fueled its premium pricing power and its gross margin.
NASDAQ: NVDA
Key Data Points
History may also be on the minds of one or more of these billionaire investors.
Every game-changing technology for more than three decades has endured a bubble-bursting event. These bubbles form when investors overestimate the adoption and/or optimization of new technologies. While Nvidia's quarterly reports have demonstrated that AI infrastructure adoption is robust, it'll likely be years before businesses optimize this technology.
To build on this point, Nvidia stock tipped the scales at a price-to-sales (P/S) ratio above 30 in early November. A P/S ratio north of 30 has often indicated the presence of a bubble in an underlying stock and/or next-big-thing trend.
Historical precedent may be enticing billionaires to cash in some of their chips.
