Billionaire Ken Griffin founded Citadel Advisors, the most profitable hedge fund ever. Investors often track his trades via quarterly Forms 13F.

In Q2, Griffin sold 9.2 million shares of Nvidia (NVDA 0.78%), cutting his stake by 79%. He also bought 98,752 shares of Super Micro Computer (SMCI -0.68%), increasing his investment by 96%. Citadel still holds more Nvidia stock than Supermicro, but these changes suggest a potential shift in strategy.

Nvidia

Nvidia is renowned for its GPUs, crucial for AI and data processing. Analysts claim Nvidia dominates the AI chip market with about 90% share, likely to continue for a few years due to:

  • Developers prefer Nvidia for its speed and extensive software tools.
  • Nvidia provides essential hardware and software for AI support.

Griffin sold Nvidia shares when it had a high valuation (67-79 times earnings), but earnings recently doubled, lowering the valuation to 64 times earnings. Analysts now predict a 37% annual earnings growth for the next three years, an upgrade from earlier estimates, making Nvidia potentially more attractive.

Super Micro Computer

Super Micro produces server solutions for data centers. Its innovation speed has positioned it strongly in AI servers. Their direct liquid cooling (DLC) tech could cut power use significantly, defending its market position amidst growing competition.

Although Supermicro reported a 143% revenue increase, its profit margins fell, sparking concerns about competition. High earnings growth (54% expected over the next 12 months) makes its current valuation enticing, but regulatory issues may have caused Griffin to reevaluate his investment.

Supermicro also faces accusations from Hindenburg Research and an ongoing Justice Department investigation, which may affect investor confidence.