Billionaires Are Selling Nvidia and Buying This TSX Stock Instead

Nvidia stock looks like it may have peaked for now, which is why billionaires are taking their winnings and putting them on another horse.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published October 15, 2024 3:45 pm EDT

Billionaires are starting to sell their Nvidia (NASDAQ: NVDA) stock, even amidst the company’s impressive growth and massive role in the artificial intelligence (AI) revolution. Nvidia has seen a staggering 182% stock price increase over the past year and boasts excellent financial metrics, including 122% year-over-year revenue growth and a 168% jump in quarterly earnings. However, Nvidia’s high valuation, with a forward price/earnings (P/E) ratio of around 35, has raised concerns about how much higher the stock can go.

A microchip in a circuit board powers artificial intelligence. — Source: Getty Images

The sale

Several well-known investors have reduced their Nvidia holdings due to its sky-high prices and the desire to lock in gains. For instance, billionaire Paul Tudor Jones sold 78% of his position in Nvidia. Even though Nvidia continues to perform well, these investors are looking for alternative opportunities where growth potential still exists without the hefty valuation.

So, where are these billionaires investing now? Many are pivoting to stocks like PayPal, Broadcom, and ZoomInfo Technologies. PayPal offers potential through its new ad network, and Broadcom is making strategic moves into AI infrastructure, while ZoomInfo offers an attractive discount following a dip in its stock price. Steven Cohen, for example, sold off part of his Nvidia stake to build a massive position in Broadcom, betting on its future role in AI development.

Why these stocks

Broadcom, in particular, is attracting attention due to its focus on low-power accelerators and AI infrastructure. Its diversified offerings in data centres, AI chips, and networking solutions make it a compelling investment – especially for those who still want exposure to AI but at a more reasonable price compared to Nvidia.

Meanwhile, PayPal is gaining traction for its potential advertising revenue stream, leveraging the data it collects from transactions. Jim Simons’ Renaissance Technologies and Paul Tudor Jones are among those who have moved capital into PayPal, hoping to catch a future wave of growth in digital payments and fintech advertising.

A Canadian option

For investors who want to diversify across all these tech opportunities, exchange-traded funds (ETF) like the iShares MSCI USA Quality Factor Index ETF (TSX: XQLT) offer a smart approach. XQLT tracks high-quality stocks and gives exposure to companies like Nvidia, Broadcom, PayPal, and others. Instead of picking individual stocks, this ETF allows you to hold a basket of top performers and benefit from the collective growth in tech and AI.

Altogether, while Nvidia remains a tech powerhouse, its high valuation has prompted some billionaires to shift focus. They are seeking growth in other tech companies like Broadcom and PayPal, which offer innovative opportunities at a more attractive price. For everyday investors, ETFs like XQLT provide a well-rounded way to gain exposure to all these trends without the need to pick individual winners.