Billionaires Dump Nvidia, Turn to TSMC as AI Sector Shifts
Data is paramount on Wall Street, especially during earnings season. The influx of operating results from most S&P 500 companies suggests investors face a relentless stream of information. Critical data can sometimes be overlooked amid this deluge.
May 15 was the deadline for institutional investors managing at least $100 million to file Form 13F with the SEC. This filing is due within 45 calendar days after a quarter ends, revealing which stocks and ETFs influential managers bought or sold. Such data highlights stocks that are gaining or losing traction in the market.
Prominent figures like Berkshire Hathaway‘s Warren Buffett may dominate attention, but other billionaires also significantly influence the market.
Stanley Druckenmiller of Duquesne Family Office and Stephen Mandel of Lone Pine Capital are notable for their impressive investment records. Recently, both investors shifted their focus within the AI sector by entirely liquidating their Nvidia holdings, amidst the evolving landscape of artificial intelligence.
Druckenmiller and Mandel Abandon Nvidia Stock
Pwc analysts estimate the AI market could reach $15.7 trillion by 2030, making room for numerous players. Nvidia has been a major beneficiary of the AI expansion, yet Druckenmiller and Mandel have decided to sell their stakes in the company.
At the end of Q2 2023, Druckenmiller held 9,500,750 shares of Nvidia, while Mandel possessed 6,416,490 shares. However, both investors have since divested entirely from Nvidia.
Nvidia’s GPUs are preferred in AI-accelerated data centers. However, the decision to sell could indicate strategic profit-taking. Nvidia’s stock surged since early 2023, adding over $3 trillion to its market cap, prompting these investors to secure their profits.
In addition to profit motives, competitive pressures in the hardware market may have factored into their decisions. While Nvidia maintains a stronghold, rival firms are enhancing their chip production and creating more efficient hardware.
Moreover, some of Nvidia’s major clients are developing their own AI-GPUs, presenting a challenge to Nvidia’s market dominance. As these new chips may be cheaper and readily available, they threaten Nvidia’s pricing power.
Historical trends are also concerning. The tech sector has experienced early bubbles and corrections over the last three decades. Rapid innovations often lead to inflated expectations that may not hold up over time. If AI’s development proceeds slowly, Nvidia, being closely tied to this market, could face significant risks.
New Focus: TSMC as Key AI Player
Despite this reduction in holdings, both billionaires have increased their investment in another AI-related company: Taiwan Semiconductor Manufacturing (NYSE: TSM) or “TSMC.” During the first quarter, Duquesne raised its stake by 491,265 shares, while Lone Pine acquired 104,937 shares of TSMC.
TSMC’s fabrication services are critical to numerous AI-GPU companies, including Nvidia and competitor Advanced Micro Devices. The company is expanding its monthly chip-on-wafer-on-substrate capacity from 35,000 units in 2024 to 135,000 units by 2026, crucial for the needs of high-compute data centers.
As demand for AI-GPUs exceeds supply, TSMC’s strategic expansion positions it advantageously in the evolving AI landscape.
# TSMC Reports Strong Sales Growth Amid AI Bubble Concerns
Taiwan Semiconductor Manufacturing Company (TSMC) has experienced a substantial backlog in chip fabrication services, with net sales from high-performance computing rising from 46% to 59% as of the end of March. This shift indicates a trend towards higher-margin products for the company.
Despite potential risks stemming from a possible AI bubble, TSMC’s order backlog and diversified revenue streams offer some protection. In the first quarter, 28% of net sales were from advanced chips for smartphones, with Apple being a major customer. Smartphone chip demand has slowed but remains a stable source of cash flow for TSMC.
The company also sees growth opportunities in the Internet of Things and automotive sectors as technology reliance increases in homes and vehicles.
Notably, investors like Druckenmiller and Mandel may find TSMC’s recent stock dip appealing. During the last weeks of March, TSMC shares dropped to a forward price-to-earnings ratio of nearly 15, presenting a competitive valuation compared to companies like Nvidia.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
5 Stocks Our Experts Predict Could Double In the Next Year
By submitting your email, you'll also get a free pivot & flow membership. A free daily market overview. You can unsubscribe at any time.
