Billionaire Ken Griffin, head of Citadel, Appears to Possess Insider Information, Sellingover Half of His Broadcom Shares and Investing in Another Artificial Intelligence (AI) Stock Following a Split
Ken Griffin, regarded as one of the most prosperous investors globally, gained notoriety by shorting stocks before the 1987 market crash, dubbed "Black Monday." His earnings last year surpassed $7 billion, and his returns of approximately 15% outperformed many rivals. However, his achievements in 2022 are even more impressive. As per CNN, Griffin's hedge fund, Citadel, became the "most successful hedge fund ever," generating profits of $16 billion - the largest annual profit recorded.
Griffin has been vocal about the promise of advanced AI. He commented, "This AI subfield will significantly impact the economy since it will take over a vast amount of work currently done by humans and do it more efficiently and productively." His words were far from empty. Towards the end of the previous year, Griffin's top five individual stock investments were all in AI-focused companies.
It is worth mentioning that Griffin has sold more than half of his stake in AI company Broadcom (AVGO -3.98%), and is instead investing in another AI-related stock-split stock.
Broadcom is on a roll
Broadcom plays a crucial role in the AI ecosystem as a provider of a wide range of products used in cable, mobile, broadband, and data center industries. The company reports that 99% of all internet traffic goes through some type of Broadcom technology, making it a vital provider of the necessary tech for AI.
In its third fiscal quarter, ending Aug. 4, Broadcom's revenue increased by 47% year-over-year to $13.1 billion, while its adjusted EPS rose by 18% to $1.24. Management remains optimistic about continued growth and increased their full-year revenue forecast to $51.5 billion, indicating a growth of 44%.
Broadcom's impressive results have led to its stock rising by 64% over the past year and 188% over the past three years. In response, management implemented a 10-for-1 stock split on July 15.
Wall Street is almost unanimously positive about Broadcom. Out of the 42 analysts covering the stock, 37 have a buy or strong buy recommendation, and none advise selling.
Despite this, during the third quarter, Griffin sold more than 3.1 million shares of Broadcom, representing approximately 64% of Citadel's stake in it. He still owns 1.72 million shares, worth approximately $296 million. Meanwhile, he has been investing in another AI-related stock - Nvidia (NVDA -2.69%).
Want some chips with that?
Griffin saw an attractive opportunity in Nvidia during the last quarter. He increased Citadel's stake by more than 4.7 million shares, representing a 194% increase. This brought his total stake in Nvidia to 7.12 million shares, worth approximately $865 million. Among Citadel's vast portfolio of stocks, Nvidia ranks as the second-largest individual stock investment.
Nvidia has become synonymous with the AI revolution, as its graphics processing units (GPUs) are the most commonly used hardware for providing the computational power necessary for training and running AI models. This high demand has resulted in increased demand for Nvidia's advanced processors, which have become the standard for virtually all data centers, where most AI processing takes place.
Nvidia's exceptional demand has had a profound impact on its financial performance. During its fiscal third quarter, ending Oct. 27, its revenue jumped by 94% year-over-year to $35 billion, and its adjusted EPS increased by 103% to $0.81. CEO Jensen Huang highlighted, "The era of AI is in full swing, driving a global shift to Nvidia computing."
Nvidia's stock has risen by 196% over the past year and 342% over the past three years due to its exceptional performance. The company's remarkable success prompted management to implement a 10-for-1 stock split, which was completed on June 10.
Broadcom is not the only AI-related stock for which Wall Street has a near-unanimous positive opinion. Out of the 64 analysts offering an opinion on Nvidia, 60 have a buy or strong buy recommendation, and none advise selling.
We do not have information on exactly when in the third quarter Griffin added to his stake in Nvidia, but the stock chart may offer some insights. In mid-June, rumors of a potential delay in the release of the company's highly anticipated Blackwell processors caused the stock to plummet, and by early August, Nvidia had lost 27% of its value. Griffin might have seen an opportunity he couldn't resist.
It appears that Griffin did not know something that Wall Street did not. Instead, he saw an attractive opportunity and acted upon it. Should retail investors follow his lead now?
Given the significant role the company plays in the ongoing AI transformation and its promising future, I am fully confident that Nvidia's shares are still a worthwhile investment.
After expressing his belief in the transformative potential of advanced AI, Ken Griffin, the head of the most successful hedge fund ever, Citadel, sold a significant portion of his stake in AI company Broadcom but increased his investment in another AI-related stock, Nvidia.
Griffin's decision to shift his focus to Nvidia, known for its graphics processing units crucial for AI models, aligns with the company's impressive revenue growth and stellar financial performance, which has seen its stock rise by over 342% in the past three years.
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