Over the past two years, you couldn’t go wrong investing in Nvidia (NASDAQ:NVDA). The stock that is today synonymous with the artificial intelligence (AI) revolution returned nearly 800% for shareholders since OpenAI‘s generative AI chatbot ChatGPT was introduced. Just $1,000 invested in the chipmaker at the time would now be worth $7,866.
But is Nvidia’s run over? Or more precisely, are there better investment opportunities out there? Some on Wall Street seem to think so. While many hedge fund operators continue to buy the AI chipmaker’s stock, others are cutting their stake. Some even sold off their entire position. The smart money is not holding cash but rather is putting the money to work elsewhere.
By following these billionaire stock picks, you might be able to stay ahead of where the smart money thinks the better opportunities lie. Here are three stocks hedge funds bought after selling down their Nvidia stock.
PayPal Holdings (PYPL)
There is a growing list of companies adding advertising platforms to generate additional revenue streams. Many of them are simply “me too” efforts to capture the buzz while others are a more natural integration of the business. PayPal Holdings (NASDAQ:PYPL) falls into the latter category.
According to The Wall Street Journal, the payments leader will be starting an ad network by mining the data collected from its extensive platform. It could be a massive opportunity because it is able to show advertisers exactly what people are buying. Other platforms like Pinterest (NYSE:PINS) are good because they show marketers what consumers are thinking of purchasing. Others, like Meta Platforms (NASDAQ:META), are only able to offer a scattershot approach to reaching potential customers. Few other than PayPal can offer agencies such granular detail on where shoppers are actually spending their money.
There are a lot of reasons PayPal stock is a buy at these prices, but the potential ad revenue it can generate seems like a major boost to its top and bottom line.
A number of hedge fund operators like what they see. Paul Tudor Jones of Tudor Investment sold 78% of his Nvidia position and bought 888,000 shares of PayPal at an average buy-in price of $64, for about $57 million. Jim Simon’s Renaissance Technologies sold two-thirds of his stake in the chipmaker and bought over 2.1 million PayPal shares, also around $64. With PayPal stock going for $63 per share at the time of this writing, you can get an even better price than these billionaire investors.
Broadcom (AVGO)
Switching AI chipmakers is what Steven Cohen did at Point72 Asset Manager. He sold off more than half of his Nvidia holdings in favor of starting a massive stake in mobile chipmaker Broadcom (NASDAQ:AVGO). He bought over 470,000 shares at an average price of $1,221 per share, meaning he went from having nothing in Broadcom to a position worth over $632 million. The semiconductor stock is now Cohen’s second-largest position.
And why not? Best known for its mobile handset chips, Broadcom recently shifted its focus to data center infrastructure. It began building custom accelerators and found them in high demand among hyper scalers and others.
Earlier this year the chipmaker said it was “evolving a broad portfolio of technologies to extend its leadership in enabling next-generation AI infrastructure.” In particular, it focused on the lowest power accelerators based on open standards to drive the widest adoption of advanced generative AI clusters.
Among the innovations it was bringing to market include Ethernet switches with unprecedented bandwidth density and efficiency, laser technologies for optical interconnect solutions for AI and machine learning, and low-power, high-efficiency retimers that resend a fresh copy of a signal rather than merely boosting an existing one.
With Broadcom’s stock up to $1,330, it is more than what Cohen paid but still a bargain for this fast-growing chipmaker.
ZoomInfo Technologies (ZI)
Famed investment manager Stanley Druckenmiller sold off nearly three-quarters of his Nvidia stake to buy ZoomInfo Technologies (NASDAQ:ZI) instead. His Duquesne Family Office hedge fund bought 5 million shares of the customer acquisition and management software specialist at an average price of $17 a share. He now owns 5.9 million shares worth $94 million.
However, the stock tumbled hard last month after ZoomInfo reported first-quarter results that beat analyst expectations on the top and bottom line. Its guidance, though, wasn’t as strong as the market wanted despite being within Wall Street’s estimates.
We’re seeing a lot of that with tech stocks lately. Super Micro Computer (NASDAQ:SMCI) had a similar market response after beating analyst estimates because its outlook also wasn’t a blow-the-doors-off number.
ZoomInfo saw net revenue retention (NRR) or the amount of money existing customers spend with the company, fall to 85% in the quarter. That is because in the current high-interest rate environment, many businesses, especially among the small- and medium-sized companies it specializes in, reined in spending. At the mid-market level, though, ZoomInfo was seeing NRR improvement.
With the stock now trading at just below $12, the business data specialist offers a 30% discount to Druckenmiller’s buy price. ZoomInfo Technologies says enterprise retention is stabilizing with renewal rates improving year over year for the first time since 2022. It suggests business will resume its upward trajectory shortly.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
