Billionaire Investor Ken Griffin Chooses Between Palantir and Nvidia Shares, Buys One and Offloads the Other
Stocks of Palantir Technologies (PLTR 0.73%) and Nvidia (NVDA 2.68%) have skyrocketed 223% and 194% respectively, by Nov. 6, due to high demand for artificial intelligence (AI). These performers rank as the second and third best in the S&P 500, just behind electric utility Vistra.
Notably, Citadel, the most profitable hedge fund in history with record net gains since inception, has been actively trading one stock while dumping another.
- Citadel acquired 4.6 million shares of Palantir from the beginning of 2024, boosting its stake by a significant 452%.
- Conversely, Citadel disposed of 33.9 million shares of Nvidia, reducing its stake by a substantial 93%.
Both Palantir and Nvidia have potential in the AI boom, but investors should weigh in on their valuations. Below's a breakdown of both companies:
Palantir: Grifffin's preferred pick
Palantir specializes in data analysis software, with its main products, Foundry and Gotham, enabling businesses to integrate data, create machine learning (ML) models, and interact with digital assets through pre-built and custom analytical tools. Its AI Platform (AIP) enhances Foundry and Gotham with support for large language models and generative AI.
In August, Forrest Research identified Palantir as a leader in AI/ML platforms, placing it ahead of other products in the market due to its capacities. However, Google ranked top in terms of growth strategy, according to principal analyst Mike Gualtieri, who stated, "Palantir is quietly becoming one of the largest players in this market."
Palantir reported impressive financials in Q3, with a 39% increase in clients to 629, and existing customers spending 18% more. As a result, revenue rose by 30% to $726 million, marking the fifth consecutive acceleration in revenue. Non-GAAP earnings also climbed 43% to $0.10 per diluted share. However, concerns over Palantir's hefty price tag remain a challenge.
As per a survey of 22 analysts following Palantir, only 27% recommend buying the stock. Analysts anticipate an increase of 29% in adjusted earnings over the next 12 months, which can leave its current valuation of 157 times adjusted earnings looking absurd.
RBC Capital's Rishi Jaluria describes this valuation as "unsustainable," a sentiment that aligns with the author's viewpoint. Potential investors should avoid the stock, while existing shareholders should consider parting with a few shares, despite Citadel's bullish stance throughout the first half of the year.
Nvidia: Griffin's divestment choice
Nvidia is renowned for its dominance in data center GPUs. Last year, it accounted for 98% of data center GPU shipments and holds a 90% market share in AI chips, according to Morgan Stanley analyst Joseph Moore. Nvidia's dominance is primarily built on its software, which is shielded by a variety of protective hardware.
By introducing its CUDA software in 2006, Nvidia set the stage for its current data center supremacy. Today, CUDA is composed of hundreds of AI application development libraries, making Nvidia an invaluable resource for developers working across AI domains, from recommender systems to robotics.
Furthermore, Nvidia recently launched its first CPU for data center servers and jumped to the front line in AI networking equipment. The company's hardware diversification offers it a further competitive edge, as it can craft entire data centers with a lower total cost of ownership, according to CEO Jensen Huang.
In Q2 of fiscal 2025, Nvidia reported robust financials, with a 122% increase in revenue to $30 billion. In addition, non-GAAP net income rose by 152% to $0.68 per diluted share. CEO Jensen Huang stated, "Nvidia achieved record revenue as global data centers are in the process of modernizing the entire computing stack with accelerated computing and generative AI."
Out of 65 analysts assessing Nvidia, 92% recommend buying the stock. Analysts predict an increase of 54% in adjusted earnings over the next 12 months, which might lend its current valuation of 65.6 times adjusted earnings a more favorable image.
Investors can feel confident in making a small bet on this stock, even after witnessing Citadel's mass sale of the stock in the first half of the year.
In light of Citadel's significant investment in Palantir, potential investors might consider the company's promising growth in the AI market, as identified by Forrest Research, despite concerns about its high valuation. On the other hand, with Nvidia having a dominant position in data center GPUs and AI chips, investors might find its lower valuation relative to its growth potential an attractive opportunity, despite Citadel reducing its stake in the company.
