Billionaire Jeff Yass' Susquehanna Just Reduced Its Position in Nvidia by 73%, and Is Buying This Other Artificial Intelligence (AI) Chip Stock Like There's No Tomorrow

Adam Spatacco, The Motley Fool

Wed, Oct 30, 2024, 2:13 AM 4 min read

Why sell Nvidia stock right now?

Nvidia is the poster child of the chip industry, fueled by record growth from its graphics processing units (GPUs). Indeed, GPUs are a critical piece of infrastructure in generative AI development and Nvidia is widely considered to have the best products on the market.

Nevertheless, I wouldn't be resting on my laurels if I was in Nvidia's position. Many of the company's own customers, including Microsoft, Alphabet, Tesla, Meta Platforms, and Amazon, are all investing heavily in their own chip infrastructure. The introduction of more GPUs on the market makes forecasting Nvidia's growth prospects pretty challenging.

While I can't say how much Nvidia will be impacted by the competition, I do think it's fair to say the pace at which Nvidia's revenue and profits are growing will slow. I think it's this conundrum that has inspired some of Wall Street's brightest minds, including Ken Griffin of Citadel and David Shaw of D. E. Shaw, to reduce their positions in Nvidia in recent periods as well.

Although Nvidia should remain a leader in the AI realm for years to come, I am wary of the stock's long-run potential following its 227% rise over the last year.

A financial analyst looking at stock charts. — Image source: Getty Images.

Why invest in Micron right now?

I'll concede right off the bat that the financial profile for Micron is tough to digest. The company's revenue trends experience noticeable peaks and valleys; meanwhile, Micron's profitability profile clearly hasn't reached a point of maturity yet.

Despite these financial inconsistencies, I see Micron as a particularly good bet on the long-run story surrounding AI.

Micron specializes in memory and storage solutions -- quite an important feature as pertains to training large language models (LLMs) and developing generative AI applications. Demand for memory solutions should witness a considerable surge as major cloud providers such as Amazon, Microsoft, Oracle, and Alphabet continue investing heavily into data center infrastructure and their own chips.

Considering many of these IT architecture projects will take years to build out and come to fruition, Micron looks well-positioned to benefit over the course of the next several years.

The future looks bright

At the end of the day, I still think keeping some exposure to Nvidia is a smart move. The company's upcoming launch of its Blackwell series GPUs should serve as a meaningful catalyst for at least the next year.

However, it's hard to know what Nvidia's growth is going to look like as the competitive landscape begins to come into focus.

By contrast, Micron hasn't really witnessed its full potential from AI tailwinds yet. In the long run, Micron could become a multibagger opportunity as revenue begins to accelerate at a steadier pace and profits begin to compound.

I think Susquehanna's decision to trim its position in Nvidia and take profits while also purchasing Micron stock is a particularly savvy decision and one that will pay off in spades over the long term.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Spatacco has positions in Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Oracle, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Billionaire Jeff Yass' Susquehanna Just Reduced Its Position in Nvidia by 73%, and Is Buying This Other Artificial Intelligence (AI) Chip Stock Like There's No Tomorrow was originally published by The Motley Fool

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