Steven Cohen’s Bold Moves in Q3: Nvidia Buying Spree and Amazon Exit
In a significant week for financial reporting, Nov. 14 marked the deadline for institutional investors managing over $100 million to disclose their portfolio changes via Form 13F to the Securities and Exchange Commission.
This document, which must be submitted within 45 days of a quarter’s end, details the stocks that major money managers like Cohen are buying or selling. While the data may not always reflect real-time actions, it provides a valuable peek into market trends and investor behavior.
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Warren Buffett remains a top figure in investment circles, yet billionaire Steven Cohen of Point72 Asset Management commands attention with over $39 billion managed for his hedge fund.
Amid many trades during the third quarter, two major actions stood out significantly.
Cohen Takes a Big Bet on Nvidia’s AI Leadership
Cohen’s most striking move last quarter was increasing his stake in Nvidia (NASDAQ: NVDA). While many investors chose to sell shares, Cohen’s Point72 added 1,574,796 shares, raising its holdings by 74%.
Three primary reasons fuel Cohen’s bullish outlook on Nvidia. First, the company holds a dominant position in the AI-graphics processing unit (GPU) market, controlling around 98% of GPUs sent to data centers in 2022 and 2023, according to TechInsights. With backorders for its highly sought after H100 (“Hopper”) chip and the new Blackwell architecture, Nvidia is well-positioned for the foreseeable future.
Secondly, Nvidia enjoys impressive pricing power. Demand for AI-GPUs has skyrocketed, allowing the company to charge between $30,000 and $40,000 for its Hopper chip, notably higher than competitors. This pricing strategy has led to gross margins surpassing 70%.
Finally, Nvidia’s technological prowess plays a crucial role. The upcoming Blackwell chip promises not only greater speed but also better energy efficiency. Its CUDA software platform helps ensure customer loyalty to Nvidia’s ecosystem.
However, there are concerns. Key customers, many of which are part of the “Magnificent Seven,” are developing their own GPU technologies, which may lead to increased competition. History shows that disruptive innovations often face challenges in maturity, and AI’s trajectory might not be an exception.
To sustain its growth and rising share price, Nvidia will require flawless execution amidst these evolving challenges.
Image source: Amazon.
Cohen Cuts Ties with Amazon’s Stock
In what proves to be another striking decision, Point72 revealed that Cohen sold all 3,163,439 shares of Amazon (NASDAQ: AMZN).
While some sales stem from profit-taking, high valuations likely influenced Cohen’s choice. Amazon is valued at 43 times its trailing earnings and boasts a market cap exceeding $2.1 trillion. Many tech giants have had to grow into such high valuations over time.
Another possible factor driving the sale relates to the current market’s elevated valuations. The S&P 500‘s Shiller price-to-earnings ratio is at a historic high during this bull market phase. Research shows that previous instances of such lofty valuations led to significant market corrections.
Yet, divesting over 3 million Amazon shares may be a decision he could reconsider later.
Amazon, famous for being the world’s leading e-commerce platform, may not boast high retail margins, but its extensive operations bolster its advertising division and lead to increased Prime memberships.
Additionally, Amazon Web Services (AWS) ranks as the top provider in the cloud infrastructure sector, capturing 33% to 35% of global spending each quarter since the beginning of 2022, according to Canalys. Given that many businesses are just beginning their cloud adoption journey, AWS stands as a significant source of future revenue and profits for Amazon.
Interestingly, some analysts argue that Amazon could be undervalued. Since the company reinvests heavily in growth, its price-to-earnings ratio may not fully reflect its value. Currently, Amazon trades at roughly 13 times projected cash flow for 2025, a significant decrease from the multiples seen in the past decade.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Sean Williams has positions in Amazon. The Motley Fool has positions in and recommends Amazon 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.
