Two hedge fund billionaires with stellar track records bought Palantir stock and sold Nvidia stock during the first quarter.
Palantir is effectively monetizing demand for artificial intelligence platforms, but it's also the most expensive software stock on the market by a wide margin.
Nvidia is effectively monetizing demand for artificial intelligence infrastructure, and the stock trades at a surprisingly reasonable valuation.
Institutional asset managers recently published their Forms 13F for the first quarter, and the filings revealed a somewhat surprising trend: Two billionaire hedge fund managers with exceptional track records purchased Palantir Technologies(NASDAQ: PLTR) and sold Nvidia(NASDAQ: NVDA), as detailed below:
Israel Englander's Millennium Management added 986,457 shares of Palantir, quadrupling its position. The hedge fund also sold 740,500 shares of Nvidia, trimming its stake by 7%.
Ken Griffin's Citadel Advisors added 902,486 shares of Palantir, tripling its position. The hedge fund also sold 1.5 million shares of Nvidia, reducing its stake by 50%.
Citadel and Millennium are two of the three most profitable hedge funds in history in terms of net gains since inception, which makes Israel Englander and Ken Griffin good sources of inspiration. But the trades listed above took place in the first quarter, which ended about 45 days ago. Here is a more current look at Palantir and Nvidia.
Image source: Getty Images.
Palantir Technologies: The stock Israel Englander and Ken Griffin bought in the first quarter
Palantir develops analytics and artificial intelligence (AI) software that helps organizations make sense of complex data. The International Data Corporation (IDC) recently ranked the company as the market leader in decision intelligence platforms, and Forrester Research recognized the company as a technology leader in artificial intelligence (AI) and machine learning platforms.
Palantir looked strong in the first quarter. Customers increased 39% to 769, and the average spend per existing customer climbed 24%. In turn, revenue increased 39% to $884 million due to particularly strong sales growth in the government segment. And non-GAAP (non-generally accepted accounting principles) earnings climbed 62% to $0.13 per diluted share. Management attributed the strong results to demand for its AI platform, and the company has continued to lean into that opportunity since the quarter ended.
In April, NATO (North Atlantic Treaty Organization) purchased the Maven Smart System from Palantir, an AI platform that fuses data from multiple sources (like drones and satellites) to improve battlefield situational awareness. The NATO deal comes on the heels of the $100 million contract awarded to Palantir in September to provide multiple U.S. military services with access to Maven.
Importantly, Palantir's revenue growth has now accelerated in seven straight quarters, and management raised its full-year guidance following strong first-quarter results. Clearly, the business is firing on all cylinders. But the stock commands an absurdly rich valuation of 64 times forward sales. The next-closest software stock is CrowdStrike at 18 times forward sales, according to Louie DiPalma at William Blair Research. That means Palantir could fall 70% and still be the most expensive software stock on the market.
I think Palantir will be worth much more in the future, so current shareholders who plan to keep the stock for several years can sit tight, provided they are comfortable with volatility. But prospective buyers should wait for a cheaper entry point. The median target price on Wall Street is $100 per share, which implies 22% downside from the current share price of $129. I would feel more comfortable buying shares at that level.
Nvidia: The stock Israel Englander and Ken Griffin sold in the first quarter
Nvidia develops accelerated computing solutions. The company is best known for graphics processing units (GPUs), chips that are the industry standard in accelerating complex data center workloads like AI. Nvidia accounts for about 90% of AI accelerator sales, and the market is forecast to expand at 24% annually through 2030.
The company is truly unique due to its full-stack strategy. Nvidia supplements its GPUs with adjacent data center hardware like central processing units (CPUs) and networking gear. It also offers a software platform called CUDA that comprises hundreds of code libraries and pretrained models that help developers write AI applications across use cases, such as conversational assistants, autonomous robots, and predictive analytics.
Nvidia reported impressive financial results in the fourth quarter of fiscal 2025, beating estimates on the top and bottom lines. Revenue increased 78% to $39 billion on strong sales growth in the data center segment, driven by demand for AI infrastructure. And non-GAAP net income jumped 71% to $0.89 per diluted share.
Nvidia recently received some good news from the Trump administration. Last week, the Commerce Department rescinded the Biden-era "AI Diffusion" rule that would have limited the quantity of advanced chips Nvidia could sell in most countries around the world. The company has already capitalized on the rule rescission by striking deals to help Saudi Arabian companies build AI factories.
Wall Street estimates Nvidia's adjusted earnings will grow 46% in fiscal 2026, which ends in January. That consensus makes the current valuation of 45 times earnings look surprisingly cheap. Those numbers give a price-to-earnings-to-growth (PEG) ratio of 1. To put that into context, Palantir currently has a terribly expensive PEG ratio of 8.5.
So, why did Ken Griffin and Israel Englander trim their positions in Nvidia? I would hazard a guess at profit taking or portfolio rebalancing. But I doubt it signals a material lack of confidence in the chipmaker. Not only do both hedge funds still own Nvidia shares, but the stock is also Millennium Management's second-largest holding, excluding options contracts.
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Trevor Jennewine has positions in CrowdStrike, Nvidia, and Palantir Technologies. The Motley Fool has positions in and recommends CrowdStrike, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.
