Billionaire Israel Englander Chooses to Invest in Palantir Shares while Offloading Super Micro Stocks.
Billionaire investor Israel Englander established Millennium Management in 1989. The firm has since become the second most successful hedge fund in history, surpassed only by Ken Griffin's Citadel, in terms of net gains since its inception, according to LCH Investments. This makes Englander an inspiring figure for individual investors.
In the second quarter, Englander sold 7.7 million shares of Palantir Technologies (PLTR), downsizing his position by 59%. At the same time, he acquired 553,323 shares of Super Micro Computer (SMCI), expanding his stake by 807%. Both stocks have significantly increased in value since January 2023, with Englander displaying a stronger interest in Super Micro during the June quarter.
Here are the pertinent details.
Palantir: The stock Englander divested
Palantir focuses on big data analysis. Its primary offerings, Foundry and Gotham, enable businesses to gather data, create machine learning models, and discover insights through analytical applications. Palantir's adjacent artificial intelligence (AI) platform, AIP, supports large language models (LLMs) and generative AI, enhancing its core software.
Palantir was recognized as a leader in AI and ML platforms by Forrester Research in August, with AIP identified as one of the strongest offerings in the AI/ML space. In September, Dresner Advisory Services named Palantir as a top-ranked vendor in a market study on artificial intelligence, data science, and machine learning software.
Palantir reported impressive financial results in Q3, surpassing Wall Street's expectations on both revenue and earnings. Revenue expanded by 30% to $726 million, representing the fifth consecutive sequential growth, while non-GAAP earnings jumped by 43% to $0.10 per diluted share. On the earnings call, CFO Dave Glazer attributed the impressive performance to "unprecedented demand" for AIP.
Looking ahead, the International Data Corp. (IDC) anticipates a 41% annual increase in AI platform spending through 2028. This growth must surely benefit Palantir, but the company's sky-high valuation raises concerns among investors.
Wall Street predicts that Palantir's adjusted earnings will grow at 27% annually through 2025. This valuation, corresponding to 168 times adjusted earnings, appears excessively costly. In fact, Wall Street has allocated a median 12-month target price of $38 per share to Palantir, implying a 36% drop from its current share price of $59. As a result, investors are advised to steer clear of this stock at present.
Super Micro Computer: The stock Englander invested in
Super Micro Computer manufactures servers, including complete server racks equipped with storage and networking, providing turnkey solutions for data center infrastructure. Super Micro frequently takes the lead to market when technological innovators, such as Nvidia and AMD, launch new chips due to its internal engineering expertise and a distinct modular approach to product development.
This advantage has propelled Super Micro to a dominant position in the AI server market, which is forecast to grow at a 30% annual rate for the next decade. Furthermore, Super Micro has established itself as an early adopter of direct liquid cooling technology, a more efficient alternative to traditional air cooling. Anticipated demand for liquid-cooled servers is expected to surge as AI infrastructure becomes increasingly energy-intensive.
However, Super Micro has been embroiled in potential legal issues. In August, short-seller Hindenburg Research accused the company of accounting manipulation. CEO Charles Liang denied the accusations, but Super Micro postponed filing its Form 10-K for fiscal 2024 and has yet to rectify the issue. It's worth noting that Super Micro was previously fined $17.5 million in 2020 for similar infringements.
In September, The Wall Street Journal reported that the Justice Department was examining Super Micro based on allegations made by a former employee. Specifics are scarce, but the accusations appear to mirror those made by Hindenburg. The situation deteriorated further in October when Super Micro's auditor, Ernst & Young, resigned, stating it was "unwilling to be associated with the financial statements prepared by management."
Although it's conceivable that Super Micro has committed no wrongdoing, investors are currently bereft of sufficient information to make a well-informed decision. As a result, the stock is best avoided (or sold) at present. In fact, it's not implausible to assume that Englander liquidated his entire Super Micro position after the second quarter.
Following his sale of Palantir Technologies shares, Englander shifted his focus to investing in Super Micro Computer. Recognizing the company's potential in the growing AI server market, he acquired additional shares, highlighting his interest in this sector.
In light of the legal issues facing Super Micro, it's advisable for investors to exercise caution when considering this stock for finance and money management. Rumors of accounting manipulation, investigations by regulatory bodies, and the resignation of its auditor contribute to an uncertain financial landscape, potentially affecting future investments in finance and money management.
