Cliff Asness and Steven Cohen, prominent billionaire investors, made significant portfolio adjustments in Q3 2024, favoring Nvidia (NASDAQ: NVDA) and reducing their holdings in Apple (NASDAQ: AAPL). These moves reflect a broader trend in the investment landscape, with Nvidia’s dominance in the AI sector attracting significant capital while concerns about Apple’s valuation emerge.
Table Content:
AQR Capital Management, led by Cliff Asness, increased its Nvidia stake by 5% to 719,710 shares, making it the firm’s largest holding. Concurrently, Asness trimmed his Apple position by 1%, reducing it to 102,651 shares, yet maintaining it as the second largest holding.
Steven Cohen’s Point72 Asset Management took a more decisive approach, boosting its Nvidia position by a staggering 75% with the acquisition of 1.5 million shares. Simultaneously, Cohen completely divested his firm’s Apple holdings, selling off 1.5 million shares. Notably, excluding options contracts, Nvidia now represents Point72’s largest holding.
The strategic decisions of these influential investors, particularly Steven Cohen, whose Point72 ranks among the top performing hedge funds globally, warrant close attention. While these transactions occurred in Q3, understanding the current dynamics surrounding both Nvidia and Apple remains crucial for informed investment decisions.
Nvidia: Riding the AI Wave
Nvidia’s position as a cornerstone of the artificial intelligence revolution is undeniable. The company’s graphics processing units (GPUs) are instrumental in accelerating data center workloads, powering machine learning model training, and enabling the execution of AI applications. Nvidia’s market share in AI accelerators exceeds 80%, solidifying its leadership in the sector.
Beyond its hardware prowess, Nvidia’s CUDA software platform, encompassing hundreds of code libraries and pre-trained models, provides a comprehensive ecosystem for AI application development. This comprehensive approach, cultivated over two decades, creates a significant barrier to entry for competitors seeking to challenge Nvidia’s dominance. Replicating both the performance of its chips and the breadth of its software ecosystem presents a formidable challenge.
Nvidia’s Q3 fiscal 2025 results underscore its robust financial performance. With a 94% surge in sales to $35 billion and a 103% jump in non-GAAP net income to $0.81 per diluted share, Nvidia has demonstrated consistent, remarkable growth. Analysts project a 50% increase in adjusted earnings over the next 12 months, suggesting that the current valuation of 54 times adjusted earnings might be surprisingly attractive. With a median target price of $175 per share, representing a potential 25% upside, a small initial investment in Nvidia appears prudent.
Apple: Navigating Valuation Concerns
Apple’s enduring brand authority translates into significant pricing power, exemplified by the premium pricing of its iPhones compared to competitors. Maintaining market leadership in smartphone sales and a strong second position in shipments solidifies Apple’s influence in the consumer electronics landscape.
Beyond hardware, Apple’s strategic expansion into services, including the App Store, iCloud, Apple Pay, and Apple TV+, provides high-margin revenue streams. The App Store leads in revenue generation among mobile app stores, outpacing competitors like Google Play Store. Apple Pay’s widespread adoption among U.S. consumers further reinforces the company’s service ecosystem strength.
While Apple’s Q4 fiscal 2024 results showcased a 6% rise in total sales to $95 billion and a 12% growth in non-GAAP earnings to $1.64 per diluted share, its future valuation raises concerns. With a projected 10% increase in adjusted earnings over the next 12 months, the current valuation of 36 times adjusted earnings, resulting in a PEG ratio of 3.6, appears significantly higher compared to Nvidia’s PEG ratio slightly above 1. This suggests a potentially overvalued position, prompting caution for prospective investors and consideration of trimming large positions for current shareholders.
Conclusion: Diverging Paths in the Tech Landscape
The contrasting investment strategies of billionaire investors highlight the diverging paths of Nvidia and Apple. Nvidia’s leadership in the rapidly expanding AI sector positions it for continued growth, while Apple grapples with valuation concerns despite solid financial performance. These divergent trajectories underscore the importance of carefully considering both growth potential and valuation when making investment decisions in the dynamic tech landscape.
