Nvidia Shares versus Taiwan Semiconductor Shares: Wealthy Investor Ken Griffin Purchases One and Disposes of the Other
Ken Griffin, placing 33rd on the Bloomberg Billionaires Index with a net worth surpassing $42 billion, is also the mastermind behind Citadel, the most profitable hedge fund in history in terms of net gains since inception. Griffin's stature makes him an inspiring figure, and retail investors can track his moves by reviewing quarterly Forms 13F.
Intriguingly, both tech giants Nvidia and Taiwan Semiconductor stand to profit from the surge in artificial intelligence (AI) infrastructure demand. However, Griffin's investment strategy in the third quarter was distinctive.
Nvidia: Griffin invested in Nvidia by buying 4.7 million shares, boosting Citadel's stake by 194%.
Taiwan Semiconductor: Griffin sold 135,556 shares, reducing Citadel's stake by 7%.
Griffin's increased investment in Nvidia highlights his growing faith in the company during the third quarter, while his decision to sell Taiwan Semiconductor shares indicates a potential wavering in confidence. But let's investigate the status of these AI stocks post-third quarter.
Nvidia: The stock Griffin bought
Nvidia's fame stems from its graphics processing units (GPUs), which excel at executing technical calculations swiftly and efficiently, far surpassing the performance of central processing units (CPUs). Nvidia GPUs play a crucial role in accelerating complex data center tasks, including artificial intelligence (AI). With an over 95% market share in AI accelerators, according to Mizuho's Vijay Rakesh, Nvidia GPUs lead the industry.
Nvidia's unique advantage lies in its vertical integration across GPUs, CPUs, and networking equipment, allowing the company to construct entire data centers. Furthermore, its proprietary CUDA software streamlines AI application development across various realms, such as robotics and drug discovery, resulting in systems with a lower total cost of ownership, per Nvidia CEO Jensen Huang.
During the third quarter of fiscal 2025, which concluded in October 2024, Nvidia exceeded estimates by a significant margin on both revenue and earnings. Revenue reached an impressive $35 billion, marking a 94% increase, driven by a 112% surge in data center sales and a 72% increase in automotive and robotics sales. Meanwhile, non-GAAP earnings more than doubled, reaching $0.81 per diluted share.
Looking ahead, analysts predict an annual growth rate of 48% for Nvidia's adjusted earnings through fiscal 2026, ending in January 2026. Considering the stock's current valuation of 55 times adjusted earnings, a well-tempered investment today would seem promising.
Taiwan Semiconductor: The stock Griffin sold
Taiwan Semiconductor Manufacturing Company (TSMC) is a vital player in the industry, offering foundry services to chip designers by shouldering the heavy investment required for chip fabrication. In the second quarter, TSMC accounted for 62% of foundry sales, marking an increase of 4 percentage points compared to the same period the prior year, according to Counterpoint Research.
Boasting the most advanced semiconductor manufacturing capabilities, TSMC is continually at the cutting edge of development, with its 3-nanometer process currently proudly holding the title as the most advanced node on the market. TSMC's 2-nanometer process is set for volume production next year, maintaining its dominance in the industry. This competitive edge has drawn prestigious clients like Apple and Nvidia, making TSMC a front-runner in the AI boom.
TSMC's financial performance in the third quarter was outstanding, with revenue rising 36% to $23.5 billion, thanks to robust growth in high-performance computing, smartphone, and internet of things (IoT) product categories. Additionally, gross margin expanded 350 basis points due to cost-cutting measures, while net income surged 50% to $1.94 per ADR.
On the earnings call, CEO C.C. Wei highlighted strong demand for their 3-nanometer and 5-nanometer technologies in both smartphones and AI-related sectors. Moreover, he indicated that revenue generated from AI server chips could triple for the entire year, substantiating its potential to capitalize on the AI boom.
As analysts expect TSMC's earnings to grow at a 23% annual rate through 2025, the stock's current valuation of 30 times earnings appears reasonable. The recent acceleration in earnings growth (from 30% to 50%) is noteworthy. Though Griffin did not anticipate this surge when he made his decision, investors should consider investing in a few shares now.
Although Griffin sold Taiwan Semiconductor shares, recognizing potential fluctuations in the market, his decision to invest significantly in Nvidia's stocks during the third quarter suggests his belief in the company's financial growth. This investment strategy, coupled with Nvidia's ongoing dominance in the AI sector and growth prospects, might prompt other finance enthusiasts to consider investing in the tech giant.
In the realm of finance, Griffin's investing choices have the potential to serve as valuable indicators. By analyzing his moves, including his increased investment in Nvidia and decision to sell Taiwan Semiconductor shares, retail investors might gain insights into the market trends and broader industry developments, shaping their own investment decisions.
