Wealthy individual Israel Englander is Ditching Nvidia Shares and Investing in Different AI-Focused Stocks Instead
Every three months, money managers managing over $100 million must submit a form 13F to the Securities and Exchange Commission (SEC). I view these 13Fs as a detailed shopping list, showing which stocks the big players in Wall Street are buying and selling.
Exploring Millennium Management's 13F filings, I stumbled upon an intriguing revelation. During the last quarter, billionaire investor Israel Englander, heading Millennium, reduced the fund's stake in Nvidia by 12.6%. This modest reduction marks the fourth consecutive quarter Millennium has offloaded Nvidia shares.
Let me introduce two AI-focused stocks Millennium has been investing in lately, as it seems to be taking a pause from Nvidia.
1. Microsoft
During the third quarter, Millennium purchased 1.6 million shares of Microsoft (MSFT 1.31%), enhancing its position by 51.4%.
Microsoft has played a pivotal role in igniting the AI revolution. Soon after OpenAI introduced ChatGPT, Microsoft made a $10 billion investment in the startup. Microsoft's goal was to utilize ChatGPT's generative AI capabilities and integrate this technology across its ecosystem.
The most significant product launch following this partnership is the introduction of multiple virtual assistants, dubbed Copilot. According to Microsoft CEO Satya Nadella, "Over 70% of the Fortune 500 now use Microsoft 365 Copilot, and customers are adopting it at a faster pace than any other new Microsoft 365 suite."
Nadella's statement signifies Microsoft's first-mover advantage in the AI market, enabling the company to develop and sell AI-powered services more swiftly. The rapid uptake of Copilot by major corporations worldwide over the past two years indicates an optimistic sign. Furthermore, Nadella hints that Copilot's growth momentum has barely hit its stride yet.
In the aforementioned article, my fellow Fool.com contributor Danny Vena highlights that "Microsoft's Azure cloud computing business saw growth primarily fuelled by AI services," which will remain crucial for Microsoft in the future.
Microsoft is a formidable player in the cloud market, competing predominantly with Amazon and Alphabet. I encourage investors to monitor how much of Azure's growth can be attributed to Microsoft's AI initiatives rather than just focusing on the rate of Azure's growth relative to the competition.
Besides Microsoft's strong presence in the AI market, the stock's bargain valuation might have caught Englander's attention. At present, Microsoft shares trade at a price-to-earnings (P/E) multiple of 34.4, which is higher than the S&P 500's average P/E ratio of 27.9. Surprisingly, Microsoft's current P/E is roughly in line with its 10-year average multiple.
Shares Owned
Despite its premium to the market, Microsoft may be undervalued as it has expanded and advanced significantly in the past decade. Moreover, the AI boom is just getting started, and if Microsoft's progress so far is an indicator of what's to come, I believe its long-term potential is quite promising.
I find Microsoft to be a compelling investment opportunity at the moment, and Millennium's choice to purchase the stock seems insightful.
2.3 million
2. Meta Platforms
Another AI-focused stock Englander increased his stake in during the last quarter is Meta Platforms (META 2.38%). The table below provides insight into Millennium's investment activities in Meta over the past few quarters.
2.0 million
| Metric | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 || --- | --- | --- | --- | --- | --- || Shares Owned | 2.3 million | 2.0 million | 2.5 million | 1.2 million | 1.3 million |
The most obvious pattern from this data is Millennium's fluctuating engagement with Meta stock over the past several quarters. Notably, the fund decreased its stake substantially between Q1 and Q2 this year, only to begin accumulating again during the latest quarter.
2.5 million
Assessing Meta's position in the AI market has proved to be challenging. Despite its substantial ad operations, Meta's Facebook and Instagram face fierce competition from organizations like Google, YouTube, TikTok, and even smaller platforms such as Pinterest and Snap.
However, Meta is making headway in AI. While the prospects of Meta's virtual and augmented reality business remain uncertain, its generative AI large language model (called Llama) is starting to challenge alternatives offered by Amazon, Google, and OpenAI.
1.2 million
Integrating AI into these products could lead to higher user engagement across Meta's platforms. During the company's third-quarter earnings call, Meta's management affirmed that its AI applications have already resulted in more time spent on Facebook and Instagram.
The opportunity here lies in translating these increased engagement rates to growth in its core ad business, allowing Meta to reinvest its profits into further AI projects and cultivate a more diverse business portfolio overall.
1.3 million
Despite some uncertainties lingering, it appears Meta might be finally gaining the upper hand. These shifts in circumstances could be influencing Englander's cautious move to invest in their shares once more.
- Given the interest in AI-focused stocks, it's worth noting that Millennium has also been investing in the financial sector. In the third quarter, the fund purchased 400,000 shares of Microsoft's rival in cloud computing, Amazon Web Services (AWS), showing a commitment to diversifying its investments in this space.
- With a keen eye on financial returns, Millennium's decisions to invest in or divest from certain stocks can have significant implications for the broader finance world. For instance, if other money managers follow Millennium's lead in reducing their holdings in Nvidia, it could potentially impact the company's stock price and broader market sentiments towards the technology sector.
