The AI Revolution: Nvidia’s Dominance Sparks Investor Interest

In the mid-1990s, the growth of the internet began transforming corporate America. Online sales created new channels for businesses and significantly impacted the growth of the U.S. economy.

Since then, investors have been on the lookout for a major innovation to drive progress. The emergence of artificial intelligence (AI) could be that game-changing moment.

Image source: Getty Images.

What makes AI appealing is its vast potential. AI-driven systems can learn and improve without human help. Analysts at PwC predict that productivity gains and consumer effects from AI could add $15.7 trillion to the global economy by 2030.

With a $15.7 trillion market ahead, many companies could succeed, but Nvidia (NASDAQ: NVDA) stands out as the most significant beneficiary of the AI boom. Since the beginning of 2023, Nvidia’s valuation has surged over $3 trillion, drawing attention from billionaire investors.

Interestingly, during the quarter that ended in June, many billionaire money managers sold Nvidia stock. However, at least one billionaire investor continues to buy aggressively.

Ken Fisher: A Consistent Supporter of Nvidia

The most prominent billionaire backing Nvidia appears to be Ken Fisher from Fisher Asset Management. His hedge fund held nearly $230 billion in assets as of mid-2024, spread across about 1,000 securities.

As of June 30, Nvidia was Fisher Asset Management’s third-largest position by market value. In the second quarter, he added 2,103,107 shares, raising his total holdings to over 93.4 million shares. Adjusting for Nvidia’s stock splits in July 2021 and June 2024, Fisher’s stake nearly doubled from about 48.6 million shares in June 2021.

The appeal of Nvidia is clear due to its dominance in the AI-graphics processing unit (GPU) market. According to TechInsights, Nvidia shipped around 98% of all GPUs to data centers in 2022 and 2023. With a backlogged demand for its popular H100 GPU and the forthcoming Blackwell architecture, Nvidia’s market leadership seems secure for 2024.

The upcoming Blackwell launch is particularly significant as it promises improvements in computing power for generative AI and better energy efficiency compared to earlier models. This advantage has helped Nvidia secure considerable orders from many leading tech firms.

Besides its hardware, Nvidia’s CUDA software platform is also crucial for client retention. CUDA helps developers train large language models and optimize the use of Nvidia’s GPUs.

Fisher and his team likely appreciate Nvidia’s strong pricing strategy. The company charges between $30,000 and $40,000 for the Hopper GPU, a markup of 100% to 300% over rival AI-GPUs, which significantly boosts its revenue.

Despite several factors that could pose concerns for investors—like market history and increasing competition—Ken Fisher remains one of Nvidia’s staunchest advocates.

Image source: Getty Images.

Fisher Asset Management Sells Off Shares of AMD

However, Fisher’s hedge fund did not invest in all AI stocks during the quarter ending in June. The significant sell-off was focused on Nvidia’s major competitor, Advanced Micro Devices (NASDAQ: AMD).

At the end of March, Fisher Asset Management owned nearly 28.9 million shares of AMD, valued around $5.2 billion. By June, the firm had sold 5,716,366 shares, reducing its stake by about 20%.

Profit-taking could explain this move. From the start of 2023 to April 2024, AMD’s stock price almost tripled. Given that Fisher Asset Management is known for its active trading strategy, regular profit-taking is not uncommon. Yet, there may be other factors at play.

For one, Fisher might prefer Nvidia’s established grip on the AI-GPU sector for high-performance data centers. Despite AMD ramping up production of its MI300X AI-GPU and planning to launch the MI325X GPU, demand has still heavily favored Nvidia.

Ken Fisher may also be cautious about AMD’s current valuation. Although fast-growing tech companies typically trade at a premium, AMD’s 13% sales growth forecast for 2024 does not justify its shares trading at an average of 46 times expected earnings per share (EPS).

Moreover, AMD is a cyclical business, and looming economic challenges could pose risks. The first notable decline in the U.S. M2 money supply since the Great Depression and the prolonged yield curve inversion usually signal downturns in the economy. Such changes could expose AMD’s vulnerabilities and slow growth.

Lastly, post-COVID-19 demand for personal computers (PCs) has declined significantly. During the pandemic, PC sales surged as many worked from home. Now that demand has dwindled, Fisher may view AMD’s prospects as less favorable.

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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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.