Important data releases are a common occurrence on Wall Street. Between earnings season, which sees a vast majority of Wall Street's largest and most-influential businesses report their quarterly operating results, and daily economic reports, it can be easy to miss something important.
For instance, you might have missed what can arguably be described as the most-important data dump of the fourth quarter last week. Nov. 14 marked the deadline for institutional investors with at least $100 million in assets under management (AUM) to file Form 13F with the Securities and Exchange Commission. This filing provides a snapshot that alerts investors to the stocks Wall Street's most-prominent money managers bought and sold in the latest quarter (i.e., ended Sept. 30).
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Although investors tend to hone in on Warren Buffett's trading activity at Berkshire Hathaway, the Oracle of Omaha is far from the only billionaire asset manager that's been highly successful on Wall Street.
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For example, Bridgewater Associates billionaire money manager Ray Dalio also has quite the following. Dalio, who runs a well-diversified fund that takes advantage of economic trends, closed out the third quarter with close to $17.7 billion in AUM.
Among the hundreds of trades executed by Dalio and his team during the September-ended quarter, perhaps none stand out more than the buying and selling activity associated with three of Wall Street's hottest artificial intelligence (AI) stock-split stocks.
Dalio's Bridgewater dumps 27% of its Nvidia shares
The first eye-popper is that Ray Dalio was a big-time seller of the market's leading AI stock-split stock, Nvidia (NASDAQ: NVDA). Nvidia completed its largest forward stock split on record (10-for-1) following the close of trading on June 7.
Despite Nvidia's AI-graphics processing units (GPUs) dominating in high-compute data centers, and the company possessing substantial pricing power on its H100 and Blackwell GPUs, Dalio's Bridgewater shed 1,801,922 shares of Nvidia in the third quarter. This represents a 27% reduction from where things stood on June 30. Although profit-taking may be the key catalyst for Bridgewater, there's potentially more to this story than just ringing the register.
For instance, Nvidia's stock has enjoyed a near-parabolic increase on the heels of the AI revolution. However, history tells us that every game-changing technology since the advent of the internet has navigated its way through an early stage bubble. Investors frequently overestimate the speed at which new technologies are adopted by businesses and consumers, eventually leading to lofty expectations not being met.
Dalio and his team might also be discouraged by U.S. regulators capping Nvidia's potential. In 2022 and 2023, regulators restricted exports of high-powered AI chips to China, the world's No. 2 economy by gross domestic product. China is a key contributor to Nvidia's sales and profits.
Lastly, Bridgewater Associates' brightest minds may be anticipating a significant uptick in competition in the AI-GPU arena. In addition to growing external competition, many of Nvidia's largest customers by net sales (mostly members of the "Magnificent Seven") are internally developing AI chips of their own. Even though these internally developed AI chips are likely to lag Nvidia in computing potential, they'll be significantly cheaper and more easily accessible. In other words, it could cause Nvidia to lose valuable data center space in the quarters to come.
Image source: Getty Images.
Bridgewater Associates nearly quadruples its stake in Wall Street's top AI-networking stock-split stock
But while Dalio and his top investment advisors were paring down Bridgewater's position in Nvidia, they were actively piling into two other prominent AI stock-split stocks.
Based on the latest 13F, 710,793 shares of AI-networking solutions specialist Broadcom (NASDAQ: AVGO) were purchased, which increased Bridgewater's stake by 291% over three months. Broadcom completed its first-ever stock split (also 10-for-1) following the close of trading on July 12.
Just as Nvidia's GPUs have garnered a monopoly like share in enterprise data centers, Broadcom's AI networking solutions have been the preferred choice for businesses. The Jericho3-AI fabric can connect up to 32,000 GPUs, with the goal being to reduce tail latency and maximize computing potential. Reducing tail latency is especially important in data centers where split-second decisions are being made by AI-driven software and systems.
But the most important thing about Broadcom might just be that it's much more than an AI company. Although AI accounts for the lion's share of its current sales growth, a majority of its revenue can be traced to its foundational operating segments. This means if an AI bubble were to form and burst, Broadcom would be in better position than Nvidia to ride out the storm.
Broadcom is an important provider of wireless chips and accessories used in next-generation smartphones. Wireless companies upgrading their networks to support 5G download speeds have increased demand for Broadcom's products.
Additionally, it offers cybersecurity solutions, provides optical components for industrial equipment, and has a portfolio of products used in next-generation vehicles. These are all segments that should steadily grow over time as vehicles become more tech-dependent and demand for automated industrial equipment increases.
Dalio also 10X'd his fund's position in a potentially troubled AI stock-split stock
The other AI stock-split stock that Dalio and his crew scooped up is customizable rack server and storage solutions specialist Super Micro Computer (NASDAQ: SMCI). The 1,453,270 shares added during the September-ended quarter increased Bridgewater's position in Super Micro by 921%!
Super Micro, which completed a 10-for-1 forward split (also its first ever) following the close of trading on Sept. 30, has enjoyed strong demand for its customizable rack servers. Businesses eager to gain competitive advantages have been willingly spending on the infrastructure needed to build out their data centers, and Super Micro Computer has played a big role in making this happen.
What's more, Super Micro incorporates Nvidia's leading GPUs into its rack servers. Using preferred hardware has been the lure that helped to more than double the company's sales in fiscal 2024 (ended June 30).
However, Super Micro Computer may not be the amazing value and growth story that it appears to be on the surface. In late August, noted short-seller Hindenburg Research issued a report that alleged "accounting manipulation" at Super Micro. Since this report, an early stage probe of the company's accounting practices was opened by the Department of Justice, according to The Wall Street Journal.
To make matters worse, accounting firm Ernst & Young, which had previously pointed to internal control concerns at Super Micro, resigned as the company's auditor in late October. While this doesn't mean the allegations levied by Hindenburg are accurate, the optics of this situation are undeniably negative.
Even though Super Micro Computer appears well-positioned for success on paper, its stock is effectively off-limits until it files its currently delayed annual report and puts these accounting questions to bed.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
