Hedge Fund Billionaires Shift Focus from Apple to Tesla

Apple (NASDAQ: AAPL) and Tesla (NASDAQ: TSLA) remain favored stocks for retail investors. However, notable hedge fund billionaires have recently altered their positions, favoring one company over the other in the fourth quarter.

• Izzy Englander of Millennium Management reduced his Apple stake by 9%. He also increased his investment in Tesla by 195%, moving it into his top 10 positions excluding options.
• Dan Loeb of Third Point completely divested from Apple. He also raised his Tesla stake by 25%, making it one of his top 20 positions.
• David Shaw of D.E. Shaw cut his Apple stake by 30%. He also increased his Tesla holdings by 188%, placing it among his top five positions.

According to LCH Investments, Millennium and D.E. Shaw are among the top three most profitable hedge funds ever, making their trading decisions relevant for individual investors. It is important to note, however, that these trades occurred in the fourth quarter, which wrapped up three months ago.

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Here is an updated overview of Apple and Tesla’s current performance.

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Image source: Getty Images.

Apple: The Stock Hedge Fund Billionaires Are Selling

Investors often consider Apple’s leadership in the smartphone market to solidify its long-term prospects. The company enjoys strong pricing power due to its blend of hardware and software expertise, evidenced by the average iPhone selling for three times more than the average Samsung smartphone last year, based on research from Counterpoint.

Moreover, Apple’s diverse service offerings—such as the App Store, Apple Care, iCloud storage, and Apple Pay—coupled with subscription services like Apple TV+ and Apple Music, bolster its revenue streams. Analysts had anticipated a surge in demand driven by artificial intelligence (AI) services and a substantial iPhone upgrade cycle following the rise of generative AI with ChatGPT. Yet, Apple has been slow to innovate in this space.

Last October, Apple launched a set of AI features branded as Apple Intelligence for its new iPhone models. Nevertheless, consumer interest appears tepid, and the expected upgrade cycle has yet to materialize. From a personal standpoint, upgrading to a supported iPhone model remains unappealing unless the new AI features significantly enhance the user experience.

Additionally, the rollout of AI enhancements for Siri has been delayed. Apple has promised to implement these features within the next year; however, some reports indicate that the updates may require a complete overhaul of the existing system, potentially elongating the timeline.

In its recent first quarter of fiscal 2025, which concluded in December, Apple reported modest growth—total revenue increased by 4% to $124 billion. Services sales rose by 14%, although iPhone sales declined 1%. Notably, GAAP earnings improved by 10% to $2.40 per diluted share, primarily driven by stock buybacks rather than genuine revenue growth.

Current Wall Street projections suggest that Apple’s earnings are expected to rise by 8% over the next four quarters. This leads to a valuation ratio of 31 times earnings, which appears high relative to anticipated growth. The median target price among analysts stands at $255 per share—implying a 17% upside from its current trading price of $218. However, caution is warranted before making any purchases in this environment.

Tesla: The Stock Hedge Fund Billionaires Are Buying

Tesla faced a significant challenge last year as it recorded its first annual decline in vehicle deliveries. Price cuts aimed at stimulating demand negatively impacted profits, resulting in market share reduction and disappointing financial outcomes. Revenue grew by only 2% to $25.7 billion in the fourth quarter, while operating margins fell two percentage points. Non-GAAP net income crept up 3% to $0.73 per diluted share.

Concern remains as market share losses have intensified in 2025. Reports from The Wall Street Journal indicate sharp declines in European sales—down 50% in January and 47% in February. Additionally, Tesla lost 4 percentage points of market share in China during the first two months of this year.

On a more optimistic note, Tesla CEO Elon Musk assured analysts during the fourth-quarter earnings call that the company is on track to release a more affordable vehicle model in the first half of 2025. This new lineup could entice buyers, though its impact will largely depend on the political landscape surrounding Musk and the company.

Moreover, Musk announced plans to launch autonomous ride-sharing services (robotaxis) in Austin by June, with intentions to expand to several other U.S. cities by year-end. According to Adam Jonas at Morgan Stanley, Tesla holds attributes that could position it as a strong contender in the autonomous vehicle sector.

Wall Street’s consensus earnings projections for Tesla have diminished as concerns regarding demand and the political climate have intensified. Analysts now foresee annual earnings growth of 22% through 2026, down from 29% just three months prior. Tesla’s current earnings valuation of 108 times appears high, especially considering it has underperformed analyst expectations in five of the last six quarters.

While there is potential for analysts to revise their forecasts upward with improvements in demand for more affordable models, there are also risks if the company fails to execute on these initiatives. Investors need to weigh these considerations carefully, as Tesla’s stock carries significant uncertainty.

Potential Investors Should Remain Cautious

It wouldn’t be surprising if the hedge fund billionaires who bought Tesla shares in the fourth quarter of 2024 decide to divest their positions within the first quarter of 2025.

Trevor Jennewine has positions in Tesla. The Motley Fool has positions in and recommends Apple and Tesla. The Motley Fool has a disclosure policy.

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