Billionaires Still Are Buying Nvidia Hand Over Fist. Should You Follow?

Investors have flocked to Nvidia (NASDAQ: NVDA) over the past few years, thanks to its leading position in the high-growth market of artificial intelligence (AI) chips and triple-digit growth in earnings. That's helped the stock soar in the quadruple digits over five years.

However, Nvidia has lost momentum in recent times as some investors worried about tougher competition from rivals like Advanced Micro Devices or Intel, which have emphasized delivering better and better AI chips. Over the past few months, Nvidia shares have floundered, falling 8% from a peak in June.

Nvidia hasn't lost its luster in the eyes of several billionaire investors, though. In the second quarter, many -- including Appaloosa Management's David Tepper, Millennium Management's Israel Englander, Point72 Asset Management's Steven Cohen, and Bridgewater Associates' Ray Dalio -- increased their positions in the company. And Viking Global Investors' Andreas Halvorsen opened a new position in the chip leader.

It looks like billionaires still are buying Nvidia hand over fist. Should you follow?

Image source: Getty Images.

The fastest GPUs

First, a little background on Nvidia. The company has risen to fame in the field of AI, thanks to its powerful graphics processing units (GPUs). With the ability to handle many things simultaneously, they're perfect for critical AI tasks such as the training and inferencing of models. Nvidia's GPUs are the fastest on the market, and the company is innovating quickly to maintain its lead. In fact, it promises to update its GPUs annually.

The company isn't just about GPUs. It commercializes an entire portfolio of AI products and services to serve all of the needs of AI customers -- from software to networking. This has helped the company grow its quarterly revenue beyond the level of its annual revenue as recently as fiscal 2023.

Now let's consider the recent moves of the billionaires I mentioned above. In the second quarter, they did the following:

• Appaloosa's David Tepper increased his Nvidia holding by 56% to 690,000 shares.
• Millennium's Israel Englander increased his Nvidia holding by 850% to 12,752,118 shares.
• Point72's Steven Cohen increased his position by 738% to 2,115,018 shares.
• Bridgewater's Ray Dalio increased his holdings by 831% to 6,556,193 shares.
• Viking's Andreas Halvorsen opened a new position in Nvidia, buying 1,384,547 shares.

Some of these billionaires haven't been buyers of Nvidia in every quarter and, instead, have locked in gains from time to time. For example, Appaloosa's Tepper, before his recent move to increase his Nvidia position, actually decreased the holding in the first quarter of this year by 44%, leaving him with 442,000 shares.

However, from the action seen in the second quarter, it's fair to say a number of billionaires still are buying Nvidia stock hand over fist and are optimistic about the company's future.

Nvidia's AI empire

Let's move on to our question: Should you follow these successful investors?

There's reason to be optimistic about Nvidia, even after its tremendous gains in recent years. That's because of the AI empire it's built and its focus on innovating to maintain its leadership.

This technological expertise and its solid reputation -- Tesla Chief Executive Officer (CEO) Elon Musk has said, "There is currently nothing better than Nvidia hardware for AI" -- offer Nvidia something investors love. That's a moat, or competitive advantage, that should keep it ahead of rivals.

On top of this, now is a great time to get in on the Nvidia story since an exciting catalyst lies ahead. The company plans to launch its new architecture Blackwell later this year, and demand already has surpassed supply. Success here could drive further positive stock performance in the near term and over time. The company even says it expects Blackwell to deliver billions of dollars in revenue as early as the fourth quarter.

It's true that competition in the market is growing, but considering demand for AI products and services, there's room for other chip designers to generate revenue growth -- without disturbing Nvidia. Billionaires' recent purchases of Nvidia stock suggests they realize all of this and are sticking with this top player as a new wave of growth -- driven by Blackwell -- arrives. You may score a win, too, if you follow this latest move.

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Adria Cimino has positions in Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Tesla. The Motley Fool recommends Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.