Nvidia (NVDA 4.14%) and Chipotle Mexican Grill (CMG 0.52%) are strong companies. Nvidia is crucial in the AI economy, while Chipotle is a leader in the restaurant industry. Both recently split their stocks to adjust their high share prices.

Despite their successes, these wealthy hedge fund managers sold shares of Nvidia in the second quarter and bought shares of Chipotle:

  • Cliff Asness (AQR) sold 1.3 million Nvidia shares, bought 673,292 Chipotle shares.
  • Israel Englander (Millennium) sold 672,242 Nvidia shares, bought 3.5 million Chipotle shares.
  • Steven Cohen (Point72) sold 409,042 Nvidia shares, bought 1.4 million Chipotle shares.
  • Steven Schonfeld (Schonfeld) sold 370,349 Nvidia shares, bought 131,715 Chipotle shares.

These trades don’t mean Nvidia is a bad investment; the managers still hold significant Nvidia shares, with it being the largest position in AQR’s portfolio.

1. Nvidia

Nvidia is key in the AI boom, holding an 80% market share in AI accelerators with its GPUs. The company’s GPUs excel due to their performance and extensive software tools.

Bank of America’s Vivek Arya raised Nvidia’s 12-month price target to $190, predicting a 75% market share in AI accelerators by decade’s end and 20% annual revenue growth in AI.

Nvidia’s recent Q2 results showed a 122% revenue increase to $30 billion, driven by strong data center demand for AI hardware. Non-GAAP earnings jumped 152% to $0.68 per share.

The upcoming launch of Nvidia’s new GPU, Blackwell, is expected to sustain momentum, with orders already booked for a year.

While hedge fund managers sold Nvidia in Q2, the valuation has become more attractive, currently at 64.7 times earnings, with expected earnings growth of 38% annually over the next three years.

2. Chipotle Mexican Grill

Chipotle operates over 3,500 restaurants in North America and Europe, focusing on “food with integrity.” It sources responsibly-raised meats and fresh ingredients, leading to strong customer loyalty.

The company emphasizes speed and efficiency, retraining employees to improve service after the pandemic.

Chipotle’s Q2 revenue was up 18% to $3 billion, with non-GAAP net income rising 36% to $0.34 per share, as they successfully met increasing demand.

Hedge fund managers bought Chipotle shares in Q2 when stocks were averaging 65.9 times earnings. Currently, they trade at 58.2 times earnings with projected 22% annual growth. Still, Chipotle is considered expensive, with a PEG ratio of 2.6, so investors may want to wait for a dip before buying.