Billionaire Israel Englander is the CEO of Millennium Management, the second-most profitable hedge fund in history in terms of net gains since inception, according to LCH Investment. That makes Englander a good source of inspiration for retail investors, and he made some interesting trades in the third quarter.
Englander sold 1.6 million shares of Nvidia(NASDAQ: NVDA), cutting his position by 13%. Nvidia stock returned 705% over the last two years.
Englander bought 213,096 shares of AppLovin(NASDAQ: APP), upping his stake by 43%. AppLovin stock returned 2,260% over the last two years.
What makes those trades interesting is that Wall Street analysts generally see substantial upside in Nvidia, but they see downside in AppLovin, as detailed below:
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Among the 67 analysts that follow Nvidia, the median target price is $175 per share. That implies 26% upside from its current share price of $138.
Among the 30 analysts that follow AppLovin, the median target price is $303 per share. That implies 10% downside from its current share price of $336.
One explanation for Englander's trades is that he knows something that most Wall Street analysts missed. Alternatively, the trades listed above were made in the third quarter, but we are now a couple months into the fourth quarter, so Englander may be buying Nvidia and selling AppLovin.
Here's what investors should know.
Nvidia: The popular AI stock Englander sold in the third quarter
The late-2022 launch of ChatGPT was the spark that started the artificial intelligence (AI) boom, and Nvidia has been one of the biggest winners. The company's graphics processing units (GPUs) are the gold standard in accelerating data center workloads like AI. And its dominance is rooted not only in superior performance, but also a more robust ecosystem of software development tools.
Nvidia delivered another beat-and-raise performance in the third quarter of fiscal 2025. Revenue rose 94% to $35 billion and non-GAAP earnings jumped 103% to $0.81 per diluted share. Analysts expected growth of 84% and 88%, respectively. Additionally, Nvidia estimates revenue will increase 70% in fourth quarter, above the 68% growth Wall Street anticipated.
Looking ahead, CEO Jensen Huang sees a $1 trillion opportunity by 2030 as data centers move from general-purpose computing to accelerated computing. But Huang also sees an incremental opportunity as some enterprises evolve into AI factories, a term that refers to large-scale computing environments purpose-built for AI. For context, spending across AI hardware, software, and services is projected to increase at 36% annually through 2030.
Against that backdrop, Wall Street expects Nvidia's earnings to increase at 38% annually over the next three years. That makes its current valuation of 54.4 times earnings look very reasonable. That begs the question: Why did Israel Englander sell the stock in the third quarter? I can only speculate about his reasoning, but one possibility is that Nvidia shares looked less attractive at the time.
Specifically, in the third quarter, Wall Street's three-year earnings forecast called for annual growth of 35%, and the stock traded at an average valuation of 60 times earnings. Put differently, analysts anticipated slower earnings growth and the stock traded at a higher earnings multiple. Both figures have since improved, so Englander may be buying Nvidia stock in the current quarter.
AppLovin: The little-known AI stock Englander bought in the third quarter
AppLovin provides ad tech software that lets mobile app developers market and monetize their applications. The company also provides software tools that serve the same purpose for connected TV (CTV) publishers. Additionally, AppLovin recently debuted an e-commerce marketing product that lets brands reach consumers through mobile advertising.
AppLovin has distinguished itself with Axon, a constellation of predictive machine learning algorithms that target advertising content with high precision. Last year, the company introduced a more sophisticated model called Axon 2.0, and its improved recommendation capabilities have boosted ad spending on the platform.
Consequently, AppLovin reported excellent financial results in the third quarter, beating estimates on the top and bottom lines. Revenue rose 39% to $1.2 billion, and GAAP net income more than quadrupled to reach $1.25 per diluted share. Management attributed the strong quarter to enhancements in its Axon models.
Importantly, AppLovin earlier this year introduced a pilot of its new e-commerce advertising product. CEO Adam Foroughi on the third-quarter earnings call said it was best and fastest-growing product in company history. He expects sales across the core mobile gaming business to grow at 20% to 30% annually, and says the e-commerce advertising product adds upside to that estimate.
Wall Street expects AppLovin's earnings to increase at 25% annually over the next three years. That makes the current valuation of 102 times earnings look expensive. So, why was Israel Englander buying the stock in the third quarter? My guess here is the exact opposite of what I speculated about Nvidia: AppLovin shares looked more attractive in the third quarter.
Specifically, Wall Street's three-year earnings forecast called for annual growth of 28%, and the stock traded at an average valuation of 39 time earnings. In other words, analysts expected AppLovin's earnings to increase faster and the valuation was cheaper. To that end, while I think AppLovin has a bright future, Englander may be selling shares in the fourth quarter.
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Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends AppLovin and Nvidia. The Motley Fool has a disclosure policy.
