In the mid-1990s, the proliferation of the internet began charting a new course for corporate America. The ability to meet customers in virtual storefronts opened never-before-seen sales channels for businesses and positively altered the growth trajectory of the U.S. economy.
Since then, investors have been waiting decades for the next big technology or innovation to drive businesses forward. The rise of artificial intelligence (AI) might just be this next step.
Image source: Getty Images.
The lure of AI has to do with its broad-reaching scope. AI-driven software and systems have the capacity to become more proficient at their assigned tasks over time, as well as learn new tasks, all without human intervention. The analysts at PwC foresee productivity improvements and consumption-side effects from the AI revolution adding $15.7 trillion to the global economy come 2030.
While a $15.7 trillion addressable market leaves room for plenty of winners, no company has more directly benefited from the rise of AI than Nvidia (NASDAQ: NVDA). Nvidia’s valuation has increased by north of $3 trillion since the start of 2023 — and billionaire investors have taken notice.
Interestingly, more than a half-dozen billionaire money managers were sellers of Nvidia stock during the June-ended quarter. But as required Form 13F filings with the Securities and Exchange Commission show, at least one billionaire asset manager has remained an avid buyer.
Billionaire Ken Fisher has been adding to his fund’s Nvidia stake for years
Nvidia’s biggest billionaire supporter looks to be Ken Fisher of Fisher Asset Management. Fisher’s hedge fund closed out the midpoint of 2024 with close to $230 billion in assets under management, which was spread across almost 1,000 securities.
Nvidia clocked in as Fisher Asset Management’s third-largest holding by market value, as of the closing bell on June 30. During the second quarter, Fisher oversaw the addition of 2,103,107 shares, which increased his fund’s position to more than 93.4 million shares. Adjusting for Nvidia’s 4-for-1 stock split conducted in July 2021, as well as its historic 10-for-1 split in June 2024, Fisher’s stake has nearly doubled from approximately 48.6 million shares in June 2021 to 93.4 million shares.
The plain-as-day attraction to Nvidia has to do with its absolute dominance in the AI-graphics processing unit (GPU) arena. According to estimates from the semiconductor analysts at TechInsights, Nvidia shipped approximately 98% of all GPUs to data centers in 2022 and 2023. With orders backlogged for its ultra-popular H100 GPU (commonly known as the “Hopper”) and successor GPU architecture (Blackwell), it doesn’t appear as if it’ll be ceding much of its monopoly like market share in 2024.
The upcoming launch of Blackwell is particularly exciting given its advancements in computing capabilities for generative AI, as well as its improved energy efficiency, when compared to its predecessor chip. Blackwell should allow Nvidia to maintain its computing superiority, which is what helped the company land big orders from most of the “Magnificent Seven.”
Although Nvidia’s hardware is doing the heavy lifting, the company’s CUDA software platform is playing an equally important role in keep clients loyal to its ecosystem of products and services. CUDA is the toolkit used by developers to train large language models and maximize the potential of Nvidia’s GPUs.
Fisher and his investment team are likely also enamored with Nvidia’s incredible pricing power. Nvidia has been charging $30,000 to $40,000 for the Hopper, which marks a premium of 100% to 300% over competing AI-GPUs. Commanding a significantly higher price point for its chips has helped the company pad its pockets.
While I’d argue there are plenty of reasons to be concerned about Nvidia as an investment, including history, increasing internal competition, and persistent insider selling, billionaire Ken Fisher remains a big supporter of Wall Street’s AI darling.
Image source: Getty Images.
Fisher Asset Management is dumping shares of Nvidia’s top rival
However, Fisher’s hedge fund wasn’t a buyer of AI stocks across the board during the June-ended quarter. The artificial intelligence stock Ken Fisher and his crew aggressively sold was Nvidia’s chief rival, Advanced Micro Devices (NASDAQ: AMD).
When the March quarter came to a close, Fisher Asset Management was holding close to 28.9 million shares of AMD, which had a market value of around $5.2 billion. Just three months later, Fisher sent 5,716,366 shares of AMD to the chopping block, representing about 20% of its previous stake.
Profit-taking is one viable catalyst for this selling activity. Between the start of 2023 and April 2024, shares of AMD came close to tripling in value. With Fisher Asset Management being a fairly active hedge fund, regular profit-taking is common. But there might also be more to this story than meets the eye.
For example, Fisher might simply favor Nvidia’s ability to hang onto the lion’s share of the AI-GPU market for high-compute data centers. Even with Advanced Micro Devices meaningfully increasing production of its MI300X AI-GPU, and recently introducing its MI325X GPU, which will go into production before the end of this year, enterprise demand has overwhelmingly favored Nvidia to this point.
Ken Fisher and his team may have also been less than enthused about AMD’s valuation. Though its common for fast-growing tech stocks sporting game-changing innovations to trade at a premium to the broader market, AMD hasn’t been growing all that fast. Sales growth in 2024 is forecast to come in around 13%, which doesn’t exactly justify shares trading at a consensus of 46 times expected earnings per share (EPS).
To build on this point, AMD is a highly cyclical business — and there are reasons to believe the going could get rougher for the U.S. economy in the upcoming year. The first notable drop in U.S. M2 money supply since the Great Depression, along with the longest inversion of the yield curve in history, have historically correlated with downturns in the U.S. economy. An economic contraction would expose AMD’s premium valuation and subpar growth rate
Lastly, Fisher might be concerned about continued post-COVID-19 weakness from personal computers (PCs). During the initial stages of the pandemic, when people were forced to work from home, sales of PCs soared. But with life returning to normal, demand for PCs has waned in a big way.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.