Billionaire Ken Griffin boosted his investment in this competing AI company's stock by over 500%, surpassing his interest in Nvidia.
Investors who jumped on the Nvidia (NVDA -3.12%) bandwagon early are reaping significant rewards, with billionaire Ken Griffin, Citadel's CEO, being one of them. Griffin initially purchased Nvidia shares back in 2013 and held onto over three million shares until late last year. However, in the first quarter of 2023, he trimmed his position by 68%, but his dedication to another AI stock saw a substantial increase of over 500%.
Griffin's decision to diversify his AI portfolio is worth heeding. His new investment is in Broadcom (AVGO 1.84%). In the first quarter, Griffin boosted his holdings in Broadcom by an impressive 500% to approximately 295,000 shares. This move has already yielded impressive returns for Griffin, with Broadcom's stock increasing by about 35% so far this year.
Broadcom's impressive performance extends beyond just one quarter. The company recently implemented a 10-for-1 stock split, offering shareholders additional shares and reducing the per-share price. While this doesn't impact the value of Griffin's or your shares, it does make Broadcom more accessible to a broader range of investors.
The driving force behind Griffin's investment in Broadcom is the company's impressive growth in the AI market. In the most recent quarter, Broadcom reported a staggering 280% increase in AI revenue, now surpassing $3.1 billion. The company attributes this growth to increased demand for AI networking and custom accelerators from mega-scale data centers.
Broadcom's future looks even more promising as data centers continue to expand. The company doubled its switch sales in the most recent quarter and is actively developing next-generation switches and optics. With the AI market expected to reach over $1 trillion by the end of the decade, Broadcom's position as a leader in the market is extremely promising.
Broadcom's growth extends beyond AI, as well. The company's acquisition of cloud software company VMware is expected to contribute to a significant 42% increase in annual revenue this year. With a forward earnings estimate of 31x, Broadcom currently falls more attractively priced than its rival, Nvidia, valued at 41x.
While Nvidia and Broadcom might compete in the chipmaker sector, it's important to note that they have different focuses. Nvidia is primarily dedicated to serving data centers and related products and services, while Broadcom's business spans a much broader spectrum, including home connectivity, smartphones, and telecommunications. This diversity could make Broadcom a more stable investment option in the long run.
However, it's worth noting that Griffin has not severed ties with Nvidia completely. Despite reducing his position, he still maintains a considerable number of shares, indicating his faith in Nvidia's future profitability.
Investors may be enticed to explore both AI stocks. While Nvidia's strategic position in the AI ecosystem and strong financial performance make it an attractive option, Broadcom's AI growth, extensive product offerings, and attractive valuation can't be ignored. Ultimately, your investment decision should be guided by thorough research and personal investment goals.
Griffin's decision to allocate more money towards Broadcom's AI stock demonstrates his belief in the company's financial potential in the AI market. Investors who are looking to diversify their portfolio might consider following in Griffin's footsteps by considering investments in both Nvidia and Broadcom, as both companies have compelling reasons to warrant consideration.
