Billionaire Exodus from Nvidia

The June-ended quarter witnessed at least seven billionaire money managers selling off Nvidia stocks for the third consecutive quarter. Notable sellers included Ken Griffin of Citadel Advisors, David Tepper of Appaloosa, and Stanley Druckenmiller of Duquesne Family Office, among others.

Despite Nvidia’s substantial 603% share appreciation since the beginning of 2023, profit-taking seems a logical motive behind this trend. However, deeper analysis suggests more underlying reasons for this mass exodus.

Investor expectations of the AI revolution may be overly optimistic, historically reflecting the bubble tendencies surrounding new technologies. Moreover, increasing external and internal competition poses a significant threat to Nvidia’s dominance in the AI market, hinting at a potential shift in the industry landscape.

Amazon’s Allure Among Billionaires

Interestingly, while billionaire investors trimmed Nvidia from their portfolios, they displayed a growing interest in Amazon (NASDAQ: AMZN) and another high-octane growth stock.

Image source: Amazon.

Five prominent billionaire investors, including Ole Andreas Halvorsen and Ray Dalio, notably increased their holdings in Amazon during the second quarter. The attraction towards Amazon lies not just in its e-commerce dominance but also in its leading cloud infrastructure service platform.

Amazon Web Services (AWS) garners global recognition for its cloud offerings, positioning Amazon as a significant player in the tech infrastructure realm. The investments made by these billionaires signal a strong vote of confidence in Amazon’s long-term growth potential.

Unveiling the Power Players: Amazon and Nio

Amazon Web Services (AWS) stands tall, accounting for a staggering 33% slice of the high-flying Amazon as of June 2024. AWS continues its upward trajectory with double-digit growth and an impressive annual run-rate sales figure north of $105 billion. Delving deeper, AWS contributes significantly to Amazon’s bottom line, consistently churning out between 50% to 100% of the company’s operating income.

The Mighty Amazon Empire

Amazon, a bustling digital realm drawing over 3 billion monthly visitors, not only reigns supreme in e-commerce but has become a compelling hub for businesses seeking advertising opportunities. The company’s advertising services revenue has exhibited robust growth over the past two years, registering a minimum of 20% year-over-year expansion. Moreover, bolstering its arsenal, Amazon has amped up its content library and secured lucrative sports partnerships, such as an 11-year streaming rights pact with the NBA and exclusive streaming rights for Thursday Night Football. These strategic moves position Amazon to extract exceptional value from its Prime subscription offering.

The Nio Phenomenon

Nestled in the heart of China, electric vehicle (EV) trailblazer Nio has captured the fancy of billionaires, nudging them to abandon Nvidia for a stake in this blossoming EV manufacturer. Despite its modest share price hovering around $5 during the second quarter, a flock of billionaires swooped in to secure their positions in Nio.

• Steven Cohen of Point72 Asset Management (4,018,659 shares)
• Israel Englander of Millennium Management (1,484,185 shares)
• Jeff Yass of Susquehanna International (626,300 shares)
• John Overdeck and David Siegel of Two Sigma Investments (395,000 shares)
• Ken Fisher of Fisher Asset Management (30,868 shares)

While the EV ecosystem has encountered headwinds in 2024, with intensifying competition and consumer hesitancy due to inadequate EV charging infrastructure, Nio has navigated these challenges with mettle. Post China’s relaxation of COVID-19 restrictions in December 2022, Nio’s production has steadily expanded, churning out approximately 20,000 EVs monthly. Notably, deliveries surged by nearly 36% year-on-year through August.

Furthermore, Nio’s penchant for innovation shines through its annual introduction of new EV models, alongside leveraging the demand surge post the launch of its NT 2.0 platform embedding advanced driver assistance features. The recent debut of the ONVO brand has broadened Nio’s portfolio, catering to a more family-centric audience and promising a more accessible price point for Chinese consumers.

In its quest for sustainable growth, Nio has diligently curbed costs while enhancing margins, yielding fruitful outcomes. Notably, vehicle margin exhibited a commendable rise of six percentage points in the quarter ending June, reaching 12.2% year-on-year. Simultaneously, adjusted net loss contracted by nearly 17%, underscoring Nio’s gradual march towards profitability.

The Investment Conundrum: Amazon’s Future

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Embark on this investment voyage wisely, weighing the potential of these untapped opportunities with sagacity in a market ripe with potential.