Nvidia (NASDAQ: NVDA) and Apple (NASDAQ: AAPL) are two of the most popular stocks among retail investors, but the billionaires listed below bought one and sold the other in the third quarter.
-
Cliff Asness at AQR Capital Management purchased 719,710 shares of Nvidia, increasing his stake by 5%. He also sold 102,651 shares of Apple, reducing his position by 1%. Nvidia is now the largest holding in the portfolio, and Apple is the second largest.
-
Steven Cohen of Point72 Asset Management bought 1.5 million shares of Nvidia, increasing his stake by 75%. He also sold 1.5 million shares of Apple, completely exiting the position. Importantly, Nvidia is now the largest holding in the portfolio, excluding options contracts.
Investors should pay close attention to the trades made by Steven Cohen. Point72 ranks among the top 15 hedge funds in terms of net profits since inception, according to LCH Investments. That said, the trades above were made in the third quarter, which ended in September. So, here is what investors need to know about Nvidia and Apple now.
Are You Missing The Morning Scoop? Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
Nvidia is the foundation of the artificial intelligence (AI) boom. Most investors probably know Nvidia graphics processing units (GPUs) are used to speed up data center workloads like training machine learning models and running AI applications. In fact, the company has over 80% market share in AI accelerators, according to several analysts.
What investors may not know is Nvidia’s dominance in the AI accelerator market is rooted not only in the superior performance of its chips, but also in the scope of its CUDA software platform. CUDA includes hundreds of code libraries and pretrained models that streamline AI application development across use cases that range from recommender systems to autonomous robots.
That means competitors looking to overcome Nvidia’s dominance will need more than fast chips. They will also need to create a robust software development ecosystem that rivals CUDA. But that is easier said than done. Nvidia has been building out its CUDA platform for the better part of two decades. Consequently, the company is well positioned to maintain its market leadership in AI accelerators.
Nvidia reported exceptional financial results in the third quarter of fiscal 2025. Sales rose 94% to $35 billion and non-GAAP net income jumped 103% to $0.81 per diluted share. That was the sixth consecutive quarter where Nvidia reported triple-digit earnings growth.
Looking ahead, Wall Street expects adjusted earnings to increase 50% in the next 12 months, which makes the current valuation of 54 times adjusted earnings look relatively cheap. Prospective investors can buy a small position with confidence today. I think most analysts that follow Nvidia would agree. The stock has a median target price of $175 per share, implying 25% upside from its current share price of $140.
Apple has a key competitive advantage in brand authority, which itself is the foundation of pricing power. For instance, the average iPhone sold for more than $900 in the third quarter, while the average Samsung Android phone sold for less than $300. Importantly, Apple is the market leader in smartphone sales and it ranks second in smartphone shipments, according to Counterpoint Research.
Apple also has a strong competitive position in other consumer electronics verticals. The company ranks fourth in personal computer (PC) shipments, first in smartwatch shipments, and first in tablet shipments. While Apple monetizes consumers with devices, it also earns higher margin revenue by providing adjacent services like App Store downloads, iCloud storage, and Apple Pay, as well as subscriptions like Apple TV+.
Apple is a major player in several of those service markets. For instance, the App Store is the top-ranked mobile app store by revenue, and its sales are growing faster than the closest contender, Alphabet‘s Google Play Store. Additionally, Apple Pay is the most popular in-store mobile wallet among U.S. consumers.
Apple reported decent financial results in the fourth quarter of fiscal 2024, which ended in September, narrowly beating estimates on the top and bottom lines. Total sales increased 6% to $95 billion, and revenue in the two most important product categories — iPhone and services — increased 6% and 12%, respectively. Meanwhile, non-GAAP earnings rose 12% to $1.64 per diluted share.
Looking ahead, Wall Street expects Apple’s adjusted earnings to increase 10% over the next 12 months. That consensus forecast makes the current valuation of 36 times adjusted earnings look very expensive. Those numbers give Apple a price-to-earnings-to-growth (PEG) ratio of 3.6, making the stock much more expensive than Nvidia, which has a PEG ratio just above 1.
For that reason, I think prospective investors should avoid Apple right now, and current shareholders should consider trimming large positions.
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
-
Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $363,671!*
-
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $45,954!*
-
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $486,533!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of December 2, 2024
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Apple, and Nvidia. The Motley Fool has a disclosure policy.
Nvidia Stock vs. Apple Stock: Billionaires Are Buying One and Selling the Other was originally published by The Motley Fool
Source: finance.yahoo.com