One of the world's most successful investors is putting his money on a company that's driving today's hottest technology. Billionaire Ken Griffin has made artificial intelligence (AI) chip designer Nvidia(NASDAQ: NVDA) his top technology holding.
As CEO of Citadel, Griffin holds about 4,000 stocks and funds. Considering this, the fact that his $1.7 billion Nvidia holding represents 1.8% of the hedge fund's portfolio is pretty significant. It shows the billionaire investor truly believes in Nvidia's long-term story in the growing AI market -- and that rivals are unlikely to take away its 80% AI chip market share any time soon.
Citadel is the most successful hedge fund ever, with a total of $74 billion in gains since its launch back in 1990. So, Griffin clearly has made many wise investment choices. Now, the big question is, considering Citadel's position in Nvidia, should you buy the stock hand over fist? Let's find out.
Image source: Getty Images.
Nvidia's rise in the AI world
First, a look at Nvidia's rise in the world of AI. The company, known for designing graphics processing units (GPUs), originally sold these chips primarily to the gaming industry. But as more and more industries realized the potential of these chips, which can process many tasks simultaneously, the GPU became a tool for general purpose computing. And the GPU's speed made it particularly useful -- and, these days, essential -- for AI tasks.
Today, Nvidia's GPUs are known as the gold standard for the training and inferencing of AI models, a crucial step in developing the technology. After all, this process allows the models to go on to do their job, the answering of complex questions.
Nvidia today sells the top-performing H100 and is expected to start shipping the H200, an even faster chip, this quarter. The company's high-quality products have helped earnings take off, with revenue and profit soaring in the triple digits in recent quarters. And that's boosted the share price, prompting the stock to climb 200% over the past year.
Of course, Nvidia isn't alone in the world of AI chips, and rivals such as Intel and Advanced Micro Devices aim to take market share from this leader. Both have announced high-powered chips in recent times. And with lower price tags, they may appeal to cost-conscious customers. These rivals will likely gain some share since certain customers don't necessarily need the highest-performing chips for their projects.
Will Nvidia stay ahead of the game?
But it's unlikely these players will unseat Nvidia in the premium chip market, and here's why. Nvidia continues to invest and create to stay ahead of the game. Later this year, the company will launch its new Blackwell architecture, a game-changing platform that includes six innovations, such as the world's most powerful chip ever. So, even as rivals innovate, Nvidia does the same -- and since Nvidia is already a step ahead and its chips and related products have an excellent reputation, it's likely to win over the long term.
When Nvidia announced its Blackwell platform, Tesla CEO Elon Musk said, "There is currently nothing better than Nvidia hardware for AI."
Meanwhile, it's important to remember that the AI era is just beginning, suggesting the demand we've seen for chips to power the technology is in its early days. All of this means that if Nvidia keeps innovating and serving customers' needs, earnings could continue to soar -- and the stock price could follow.
Today, Nvidia shares trade for 34 times forward earnings estimates, which looks like a bargain, considering the company's dominance in the AI chip market, its ongoing focus on innovation, and the idea that demand should continue for quite some time.
All this means that Ken Griffin may have made yet another wise investing move by betting on Nvidia. And if you're looking for a potential long-term AI winner and already have a diversified portfolio, buying shares of Nvidia hand over fist is a great idea.
Should you invest $1,000 in Nvidia right now?
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Adria Cimino has positions in Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Tesla. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
