Ken Griffin is arguably probably the most profitable traders of all time. He made a reputation for himself when he shorted shares simply forward of the 1987 market crash that got here to be often known as “Black Monday.” His income final 12 months topped $7 billion as his returns of roughly 15% outpaced a lot of his friends. That consequence pales compared to his efficiency in 2022, although, when Citadel turned “essentially the most profitable hedge fund ever,” in line with CNN, producing income of $16 billion, the “largest annual windfall on document.”
Griffin has been outspoken concerning the potential for generative AI. “This department of AI will likely be game-changing for the economic system,” he stated, “as a result of it’ll take an unlimited quantity of labor that is executed at the moment by folks and do it in a distinctly totally different, extremely automated, extremely environment friendly manner.” These weren’t simply empty phrases. On the finish of final 12 months, Griffin’s top five individual stock holdings had been all AI corporations.
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It is due to this fact price noting that Griffin has offered extra than half his stake in AI inventory Broadcom (NASDAQ: AVGO), and is pouring funds into one other AI stock-split inventory as an alternative.
Picture supply: Getty Photographs.
Broadcom has been on hearth
Broadcom is without doubt one of the gatekeepers within the AI ecosystem. The firm supplies a variety of merchandise used within the cable, cell, broadband, and knowledge heart industries. It studies that “99% of all web visitors crosses by means of some sort of Broadcom know-how,” making it a key supplier of the tech essential to facilitate AI.
In its fiscal third quarter, which ended Aug. 4, Broadcom’s income grew 47% 12 months over 12 months to $13.1 billion, whereas its adjusted earnings per share (EPS) elevated 18% to $1.24. Administration expects its progress streak to proceed, and boosted its full-year income forecast to $51.5 billion, which might equate to progress of 44%.
These outcomes assist illustrate why Broadcom inventory is up 64% over the previous 12 months and 188% over the previous three years (on the time of this writing). The inventory has risen a lot, in reality, that administration instituted a 10-for-1 inventory cut up that was accomplished on July 15.
Wall Street is almost unanimous in its opinion of Broadcom. Of the 42 analysts who cowl the inventory, 37 price it a purchase or sturdy purchase, and none suggest promoting.
That backdrop makes it all of the extra notable that, throughout the third quarter, Griffin offered extra than 3.1 million shares of Broadcom — roughly 64% of Citadel’s stake in it. He nonetheless holds 1.72 million shares price about $296 million. On the identical time, he was shopping for one other AI inventory — Nvidia (NASDAQ: NVDA).
Need chips with that?
It is clear Griffin thought Nvidia represented a compelling alternative final quarter. The billionaire investor elevated Citadel’s stake by extra than 7 million shares, a rise of 454%. That introduced his whole stake to 712 million shares price $865 million. Among the many 1000’s of shares in Citadel’s portfolio, Nvidia is the second-largest particular person inventory holding.
Nvidia has been the poster baby for the AI revolution, as its graphics processing items (GPUs) are the most-used {hardware} for offering the computational horsepower wanted to coach and run AI fashions. This has induced a run on the corporate’s state-of-the-art processors, which have change into the gold normal for knowledge facilities, the place most AI processing takes place.
The unprecedented demand has had an unmistakable influence on Nvidia’s monetary outcomes. Throughout its fiscal 2025 third quarter, which ended Oct. 27, Nvidia’s income soared 94% 12 months over 12 months to $35 billion, whereas its adjusted EPS surged 103% to $0.81. Administration left little question about what drove the outcomes. “The age of AI is in full steam, propelling a worldwide shift to Nvidia computing,” stated CEO Jensen Huang.
These outcomes assist clarify why Nvidia inventory is up 196% over the previous 12 months and 342% over the previous three years (as of this writing). The firm’s unbridled success led administration to provoke a 10-for-1 inventory cut up, which was accomplished on June 10.
Broadcom is not the one AI stock-split inventory that Wall Street is almost unanimous about. Of the 64 analysts who’ve supplied an opinion on Nvidia, 60 price the inventory a purchase or sturdy purchase, and none suggest promoting.
We do not know precisely when throughout the third quarter that Griffin added to his stake in Nvidia, however a fast have a look at the inventory chart may present some perception. In mid-June, rumors a couple of potential delay within the launch of the corporate’s extremely anticipated Blackwell processors despatched the inventory tumbling, and by early August, Nvidia had shed 27% of its worth. Griffin possible noticed a discount he could not resist.
It seems that Griffin most likely did not know one thing that Wall Street does not. He merely noticed a compelling alternative, and he took it. Ought to retail traders observe his lead now?
Nvidia inventory at the moment trades for 69 instances earnings, however that P/E metric does not keep in mind the corporate’s above-average progress. Wall Street is predicting Nvidia will generate EPS of $4.36 in its fiscal 2026, which can start in late January. That offers it a valuation of about 34 instances ahead earnings. Whereas that is definitely nonetheless a premium value, Nvidia is guiding for year-over-year income progress of 70% within the present quarter, with a commensurate uptick in income, and Wall Street is predicting gross sales progress of 49% subsequent 12 months.
Given the corporate’s vital place within the AI revolution and its strong prospects, I’m utterly satisfied that Nvidia inventory continues to be a purchase.
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Danny Vena has positions in Nvidia. The Motley Idiot has positions in and recommends Nvidia. The Motley Idiot recommends Broadcom. The Motley Idiot has a disclosure policy.
Does Billionaire Ken Griffin Know Something Wall Street Doesn’t? The Citadel Chief Sold More than Half His Broadcom Stock and Is Piling Into Another Artificial Intelligence (AI) Stock-Split Stock Instead was initially revealed by The Motley Idiot