Billionaire Ken Fisher is investing in the artificial intelligence (AI)-based colossus Nvidia and dumping shares in its main competitor

In the mid-1990s, the spread of the Internet began to set American businesses on a new course. The ability to meet customers in virtual storefronts opened up unprecedented sales channels for businesses and positively changed the growth trajectory of the U.S. economy.

Since then, investors have waited decades for the next big technology or innovation to propel companies forward. The rise of artificial intelligence (AI) could be the next step.

Image source: Getty Images.

The appeal of AI lies in its far-reaching reach. AI-driven software and systems have the ability to perform their assigned tasks better over time and learn new tasks, all without human intervention. Analysts at PwC predict that the AI ​​revolution will add $15.7 trillion to the global economy by 2030 through productivity gains and consumer side effects.

While a $15.7 trillion addressable market leaves room for numerous winners, no company has benefited more directly from the rise of AI than Nvidia (NASDAQ:NVDA). Nvidia's valuation has risen by more than $3 trillion since the start of 2023 – and billionaire investors have noticed.

Interestingly, more than half a dozen billionaire asset managers were sellers of Nvidia shares in the June-ended quarter. But as Form 13F filings with the Securities and Exchange Commission show, at least one billionaire asset manager remains an enthusiastic buyer.

Billionaire Ken Fisher has been increasing the Nvidia portion of his fund for years

Nvidia's biggest billionaire backer appears to be Ken Fisher of Fisher Asset Management. Fisher's hedge fund closed mid-2024 with nearly $230 billion in assets under management, spread across nearly 1,000 securities.

Nvidia was Fisher Asset Management's third-largest holding by market value as of the close on June 30. During the second quarter, Fisher oversaw the addition of 2,103,107 shares, increasing his fund's position to more than 93.4 million shares. Adjusted for Nvidia's 4-for-1 stock split in July 2021 as well as its historic 10-for-1 stock split in June 2024, Fisher's holdings have increased from approximately 48.6 million shares in June 2021 to nearly 93.4 million shares doubled.

Nvidia's obvious appeal has to do with its absolute dominance in the AI ​​graphics processing unit (GPU) space. According to estimates from semiconductor analysts at TechInsights, Nvidia shipped about 98% of all GPUs to data centers in 2022 and 2023. The backlog of orders for its hugely popular H100 GPU (commonly known as “Hopper”) and successor GPU architecture (Blackwell) doesn't look like it will give up much of its monopoly-like market share in 2024.

Blackwell's upcoming launch is particularly exciting given its advances in generative AI computing capabilities as well as its improved power efficiency compared to the previous chip. Blackwell was intended to allow Nvidia to maintain its computing superiority, which has helped the company win large orders from most of the Magnificent Seven.

Although Nvidia's hardware does the heavy lifting, the company's CUDA software platform plays an equally important role in locking customers into its ecosystem of products and services. CUDA is the toolkit developers use to train large language models and maximize the potential of Nvidia's GPUs.

Fisher and his investment team are also likely excited about Nvidia's incredible pricing power. Nvidia has charged $30,000 to $40,000 for the Hopper, which represents a 100 to 300% premium over competing AI GPUs. The significantly higher price of its chips has helped the company line its pockets.

While I think there are many reasons to be concerned about Nvidia as an investment, including history, increasing internal competition, and continued insider selling, billionaire Ken Fisher remains a big supporter of Wall Street's AI darling.

Image source: Getty Images.

Fisher Asset Management is selling shares in Nvidia's biggest competitor

However, Fisher's hedge fund was not a widespread buyer of AI stocks in the June quarter. The artificial intelligence stock that Ken Fisher and his team sold aggressively was Nvidia's main competitor. Advanced micro devices (NASDAQ:AMD).

As the March quarter ended, Fisher Asset Management held nearly 28.9 million AMD shares with a market value of about $5.2 billion. Just three months later, Fisher put 5,716,366 AMD shares on the chopping block, which was about 20% of his previous holding.

Profit taking is an effective catalyst for this selling activity. Between the beginning of 2023 and April 2024, the value of AMD shares almost tripled. Since Fisher Asset Management is a fairly active hedge fund, regular profit-taking often occurs. But there could be more to this story than meets the eye.

For example, Fisher might simply prefer Nvidia's ability to retain the lion's share of the AI ​​GPU market for high-computing data centers. Although Advanced Micro Devices has significantly increased production of its MI300X AI GPU and recently introduced its MI325X GPU, which will enter production later this year, corporate demand has so far been overwhelmingly in Nvidia's favor.

Ken Fisher and his team may not have been thrilled with AMD's valuation either. Although it's common for fast-growing technology stocks with breakthrough innovations to trade at a premium compared to the broader market, AMD hasn't grown as quickly. Revenue growth of around 13% is forecast for 2024, which doesn't exactly justify the shares trading at a consensus of 46 times expected earnings per share (EPS).

To build on this point, AMD is a highly cyclical company – and there are reasons to believe that things could get tougher for the US economy in the coming year. The first significant decline in the US M2 money supply since the Great Depression and the longest yield curve inversion in history have historically correlated with downturns in the US economy. An economic downturn would expose AMD's premium valuation and subpar growth rate

Finally, Fisher may be concerned about the continued weakness of personal computers (PCs) post-COVID-19. In the early stages of the pandemic, when people were forced to work from home, PC sales skyrocketed. But with the return to normality, demand for PCs has fallen sharply.

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