Nvidia and Apple Stock Differentials: Wealthy Individuals Purchasing One Whilst Dismantling the Other
Nvidia and Apple Stock Differentials: Wealthy Individuals Purchasing One Whilst Dismantling the Other
Nvidia (NVDA 4.45%) and Apple (AAPL -0.20%) are often favored by retail investors, but some billionaire hedge fund managers had different preferences in the third quarter.
- Cliff Asness at AQR Capital Management acquired 719,710 shares of Nvidia, boosting his stake by 5%. Simultaneously, he sold 102,651 shares of Apple, reducing his position by 1%. Now, Nvidia holds the largest spot in his portfolio, with Apple falling to second place.
- Steven Cohen of Point72 Asset Management bought 1.5 million shares of Nvidia, boosting his stake by 75%. Conversely, he sold all 1.5 million shares of Apple, completely exiting his position. Notably, Nvidia is now the primary holding in Cohen's portfolio, excluding options contracts.
Investors should keep an eye on Cohen's trades. Point72 consistently ranks among the top 15 hedge funds in terms of net profits since its inception, according to LCH Investments. However, note that these trades were made during the third quarter, which concluded in September.
Nvidia: The Stock Heavily Backed by Certain Billionaire-led Hedge Funds
Nvidia is the backbone of the artificial intelligence (AI) revolution. Most investors are likely familiar with Nvidia's graphics processing units (GPUs), which speed up data center tasks like training AI models and running applications. In fact, the company commands over 80% market share in AI accelerators, according to analysts.
What many investors may not realize is that Nvidia's dominance in the AI accelerator market is not solely based on its high-performance chips but also on the versatility of its CUDA software platform. CUDA incorporates hundreds of code libraries and pre-trained models, simplifying AI application development across a wide range of use cases, from recommendation systems to autonomous robots.
Those wanting to challenge Nvidia's dominance must overcome more than just fast chips. They need to build a strong competing software development ecosystem, which is no small feat. Nvidia has spent nearly two decades developing its CUDA platform and has a substantial advantage in this area.
During the third quarter of fiscal 2025, Nvidia reported impressive financial results. Sales increased by 94% to $35 billion, and non-GAAP net income surged by 103% to $0.81 per diluted share. In six consecutive quarters, the company has reported triple-digit earnings growth.
Looking forward, analysts anticipate Nvidia's adjusted earnings to grow by 50% over the next 12 months. At its current valuation of 54 times adjusted earnings, the stock seems reasonably priced, and investing in a small position now appears confidently possible. Most analysts following Nvidia agree with this sentiment and have set a median target price of $175 per share, representing a 25% rise from its current price of $140.
Apple: The Stock Certain Billionaire-led Hedge Funds Were Shedding
Apple holds an edge in brand authority, which underpins its pricing power. For example, the average iPhone sold for more than $900 in the third quarter, while the average Samsung Android phone cost less than $300. Significantly, Apple leads in smartphone sales and ranks second in smartphone shipments, as revealed by Counterpoint Research.
Additionally, Apple has a powerful position in various other consumer electronics sectors. The company holds the fourth spot in personal computer (PC) shipments, dominates smartwatch shipments, and ranks first in tablet shipments. Apple monetizes consumers through devices, but also generates higher margin revenue via services like App Store downloads, iCloud storage, and Apple Pay, as well as subscriptions like Apple TV+.
Apple has a considerable presence in several service markets. For instance, the App Store is the leading mobile app store by revenue, and its sales are growing at a faster rate than Alphabet's Google Play Store, its closest competitor. Furthermore, Apple Pay is the preferred mobile wallet among American consumers.
Apple released solid financial results during the fourth quarter of fiscal 2024, which ended in September. Total sales increased by 6% to $95 billion, and revenue from the iPhone and services categories increased by 6% and 12%, respectively. Furthermore, non-GAAP earnings climbed by 12% to $1.64 per diluted share.
Looking ahead, analysts predict Apple's adjusted earnings will grow by 10% over the next 12 months. However, given its current valuation of 36 times adjusted earnings, many consider Apple to be excessively expensive. The stock's price-to-earnings-to-growth (PEG) ratio of 3.6 also indicates a pricey valuation compared to Nvidia's relatively lower ratio.
Therefore, I suggest prospective investors stay away from Apple at present and existing shareholders might want to consider trimming large positions.
After observing the third quarter trades, billionaire hedge fund manager Steven Cohen of Point72 Asset Management fully exited his position in Apple, selling all 1.5 million shares, while significantly increasing his stake in Nvidia by buying 1.5 million shares. This move has positioned Nvidia as the primary holding in Cohen's portfolio, further highlighting the interest of certain billionaire-led hedge funds in the AI revolution company.
Investors might be interested to know that, despite Apple's brand authority and strong position in various consumer electronics sectors, its current valuation of 36 times adjusted earnings is considered excessively expensive by some analysts, given its projected 10% earnings growth over the next 12 months. On the other hand, Nvidia's stock, with a median target price of $175 per share, represents a potential investment opportunity, according to most analysts following the company, even with a PEG ratio lower than Apple's.