Billionaire Ken Griffin is the CEO of Citadel Advisors, the leading hedge fund in terms of net gains. Investors often watch his trades using quarterly Forms 13F.
In the second quarter, Griffin sold 9.2 million shares of Nvidia (NVDA 0.78%), cutting his stake by 79%. He also purchased 98,752 shares of Super Micro Computer (SMCI -0.68%), increasing his investment by 96%. Currently, Citadel still has more investment in Nvidia than Supermicro, but these changes may indicate a shift in strategy.
Here’s what you should know about both companies.
Nvidia
Nvidia is renowned for its graphics processing units (GPUs), which are critical for AI applications and handling data center workloads. Analysts at Forrester Research claim, “Nvidia drives AI infrastructure globally. Modern AI relies on Nvidia GPUs.”
Nvidia commands about 90% of the AI chip market, a dominance expected to last two to three years due to its superior product performance and extensive software ecosystem. The company also produces complementary hardware and software for AI, which enhances efficiency and reduces energy use.
When Griffin sold shares, Nvidia stock had an average price-to-earnings (P/E) ratio of 67, which dropped slightly to 64 as earnings doubled in the June quarter. Analysts predict Nvidia’s earnings will grow by 37% annually over the next three years, an improvement from previous estimates. This makes Nvidia potentially more attractive now compared to when Griffin sold.
Super Micro Computer
Super Micro Computer manufactures servers and related infrastructure for data centers. Their innovative designs and speed to market position them well in the AI server space.
While competition will increase as companies like Dell Technologies ramp up AI infrastructure demands, Supermicro’s expertise in direct liquid cooling (DLC) can give them an edge, potentially reducing power consumption significantly.
The company’s recent financial results were mixed. Despite a 143% revenue increase to $5.3 billion, gross margins dropped nearly 6 points, indicating potential pricing difficulties. Management expects margins to improve by 2025.
Griffin invested in Supermicro earlier this year, but his view may have shifted following allegations of accounting issues from Hindenburg Research. Although the company denies these claims, past infractions and ongoing investigations by the Justice Department pose risks to investors.
Despite the challenges, analysts expect AI server sales to rise 30% annually through 2033, and Supermicro’s adjusted earnings are projected to grow 54% in the next year. This makes their current valuation appear attractive, but due to the unresolved regulatory concerns, Griffin may have actually reduced his stake in Supermicro since the last quarter.
