Billionaire Israeli Englander Sells Nvidia and Palantir to Invest in Historically Cheap, But Highly Complicated, Artificial Intelligence (AI) Stock | The Motley Fool

In mid-August, Wall Street received its most important third-quarter release — and I’m not talking about the inflation report from the Bureau of Labor Statistics.

August 14 is the deadline for institutional investors and fund managers with at least $100 million in assets under management to file Form 13F with the Securities and Exchange Commission. A 13F provides a bottom-up view of the smartest and best-performing Wall Street money managers who bought and sold during the most recent quarter (in this case, the last quarter of June).

While 13Fs have their flaws — for example, they’re only 45 days old, which can result in outdated operating income data — they are valuable in helping investors identify stocks, industries, sectors, and divisions. the trend is attracting the attention of Wall Street economists.

Billionaire Israel Englander of Millennium Management is one of the most famous money managers that investors tend to pay close attention to. According to Millennium’s latest 13F, Englander and his team oversee about $216 billion in securities under management, spread across thousands of securities, including a variety of call options.

But what stands out about Englander’s trading performance at the end of June is his performance in Artificial Intelligence (AI) stocks. Englander has shown two of Wall Street’s favorite AI stocks to the door, as he dives into another low-cost AI company facing headwinds.

Englander’s Millennium sends shares of Nvidia and Palantir to the chopping block

Two of the most popular smart devices that suspect Englander’s Millennium Management went down in the second quarter are the semiconductor colossus. Nvidia (NVDA 2.43%) is a cloud mining expert Palantir Technologies (PLTR -0.25%).

Millennium has owned Nvidia shares since 2008, so it is the biggest beneficiary of the AI ​​revolution. But at the end of June, Englander’s fund reduced its position in Nvidia by 676,242 shares.

It is quite possible that this represents nothing more than profit taking and redistribution of goods. Nvidia has grown from a $360 billion company to end 2022 into a $3.25 trillion business, as the closing bell on Oct. 9, 2024. Locking in profits after a move to a higher high may seem like a smart move.

But there are other concerns that could force Englander to reduce Millennium’s stake in Nvidia. For example, although Nvidia’s AI-graphics processing units (GPUs) is the undisputed top choice as the “brain” of AI-accelerated data centers, external and internal competition is starting. In particular, four of Nvidia’s largest networking customers are developing AI-GPUs internally for use in their data centers. This suggests that the future chances of winning the key data center space will be limited for the AI ​​hardware kingpin.

History has also been unkind to leading businesses of the next big thing. Marketers have overstated the potential and use of any game-changing technology over the past 30 years, and AI seems to be no exception to this unwritten rule.

In addition to selling Nvidia shares, Englander’s fund reduced its stake in Palantir Technologies by 7,074,815 shares. Millennium has been holding Palantir stock since its initial public offering in 2020.

On the other hand, Palantir is riding the wave of consistency in the space industry. The company’s AI-powered Gotham platform, which collects data and helps improve government services, including its enterprise-focused Foundry platform, has no competitors. Wall Street often rewards companies with stable moats with high valuations.

But at some point, the nose count, even with a regular moat, can be a hard pill to swallow. By Oct. 9, Palantir is valued at 100 times forward-year earnings per share (EPS) and a jaw-dropping 35 times forecast earnings for this year. It is impossible to confirm this calculation based on annual sales growth of about 20%.

Additionally, the long-term potential of Palantir’s Gotham division is inherently limited. This is a platform that Palantir executives only allow the US and its partners to access. This means that future growth and profitability will depend heavily on Foundry. While this isn’t necessarily a bad thing, Foundry is still in its early stages, which makes Palantir’s $96.6 billion market cap a bit of a concern.

Here’s a cheap old AI stock that Israel Englander can’t stop buying

While Englander was an active seller of two of Wall Street’s top artificial intelligence stocks, he was also an active buyer of an undervalued AI stock whose path to growth has faltered in recent months. I’m talking about flexible customization systems and professional solutions providers Super Micro Computer (SMCI -0.86%).

After the 10-for-1 stock split Super Micro completed two weeks ago, Englander’s Millennium Management bought 5,533,230 shares in the second quarter, increasing the fund’s holdings in the company by 800% since the end of March.

Just as Nvidia has become the AI-GPU provider for high-end data centers, the Super Micro Computer has been playing catch-up for businesses looking to build their own AI data centers. Super Micro also includes Nvidia’s most popular H100 GPU in its custom servers, further enhancing the value of its solutions.

In fiscal 2024, which ended on June 30, the company posted a 110% increase in sales to $14.94 billion. For the economy of 2025, the center of the economic forecast of Super Micro requires $ 28 billion. Despite forecasts of 62% annual earnings growth through fiscal 2029, the company’s shares are currently trading at less than 11 EPS for fiscal 2026.

The reason why Super Micro Computer stock is not selling at such a high price because of its large size is because of the wind. For example, it was the focus of a brief report by Hindenburg Research at the end of August. Hindenburg says “accounting mess” at Super Micro. Although the company has denied this, it has also delayed filing its annual report and is said to be facing a preliminary investigation by the US Justice Department.

There are also concerns that supply chains could prevent Super Micro Computer from meeting the needs of its customers. Nvidia’s H100 GPUs are in such high demand that Super Micro rack servers can collapse to provide spare parts.

Suffice it to say that, despite its low cost, the Super Micro Computer is a threat to Englander and Millennium Management.