Billionaire Israel Englander Is Selling Nvidia and Palantir and Piling Into a Historically Cheap, Yet Potentially Troubled, Artificial Intelligence (AI) Stock

In mid-August, Wall Street received its most important data dump of the third quarter -- and I'm not talking about an inflation report from the Bureau of Labor Statistics.

August 14 marked the deadline for institutional investors and money managers with at least $100 million in assets under management to file Form 13F with the Securities and Exchange Commission. A 13F offers an under-the-hood look at which stocks Wall Street's smartest and most-successful money managers purchased and sold in the latest quarter (in this instance, the June-ended quarter).

Although 13Fs have their flaws -- e.g., they're usually 45 days old when filed, which can lead to stale data for active funds -- they're invaluable when it comes to helping investors figure out which stocks, industries, sectors, and trends are piquing the interest of Wall Street's top asset managers.

Billionaire Israel Englander of Millennium Management is one of the prominent money managers that investors tend to pay very close attention to. Based on Millennium's latest 13F, Englander and his team are overseeing close to $216 billion in managed securities, which is spread out across thousands of positions, including various put and call options.

But what stands out most about Englander's trading activity during the June-ended quarter is how he approached artificial intelligence (AI) stocks. Englander showed shares of two of Wall Street's favorite high-flying AI stocks to the door, while absolutely piling into another historically cheap AI company that's encountering some serious headwinds.

Englander's Millennium sends shares of Nvidia and Palantir to the chopping block

The two ultra-popular artificial intelligence stocks in question that Englander's Millennium Management pared down during the second quarter are semiconductor colossus Nvidia (NASDAQ: NVDA) and cloud-based data-mining specialist Palantir Technologies (NYSE: PLTR).

Millennium has held shares of Nvidia since 2008, so it's certainly been a prime beneficiary of the AI revolution. But during the June-ended quarter, Englander's fund reduced its position in Nvidia by 676,242 shares.

It's certainly possible that this represents nothing more than simple profit-taking and asset reallocation. Nvidia has grown from a $360 billion company to end 2022 into a $3.25 trillion business, as of the closing bell on Oct. 9, 2024. Locking in gains following a nearly parabolic move higher would seem to be a prudent move.

But there are other concerns that may be compelling Englander to reduce Millennium's stake in Nvidia. For instance, even though Nvidia's AI-graphics processing units (GPUs) are the undisputed top choice as the "brains" of AI-accelerated data centers, external and internal competition are picking up. In particular, Nvidia's four-largest customers by net sales are internally developing AI-GPUs for use in their data centers. This suggests future opportunities to win valuable data center real estate will be limited for the AI hardware kingpin.