• The three best-performing hedge funds in history sold shares of Nvidia Stock during the second quarter while redeploying capital into another semiconductor stock.
  • Nvidia is the market leader in data centre graphics processing units and artificial intelligence chips, and its robust ecosystem of supporting software gives the company an advantage.
  • Broadcom is the market leader in application-specific integrated circuits, and demand for those custom chips could increase markedly as businesses invest in artificial intelligence infrastructure.

In the second quarter, prominent hedge fund managers trimmed their holdings in Nvidia stock and increased their stakes in Broadcom, signalling a strategic shift in the AI-driven semiconductor market. These moves highlight a growing interest in Broadcom’s potential as a key player in the industry.

Nvidia Stock: The AI Giant Facing Adjustments

Nvidia has been a standout performer, dominating the AI chip market with an 80% share. Its GPUs are the gold standard in accelerated computing, thanks to its robust CUDA software ecosystem. Despite this success, hedge fund managers like Israel Englander, Ken Griffin, and David Shaw reduced their Nvidia positions in Q2, likely to capitalize on the recent gains. Nvidia remains a crucial holding for these investors, with strong growth prospects and a reasonable valuation, but short-term volatility is expected as the company reports earnings and addresses potential delays in its Blackwell GPU shipments.

Broadcom Stock
Broadcom StockSource The Motley Fool

Broadcom: A Rising Star in AI Infrastructure

While hedge funds reduced their Nvidia exposure, they significantly increased investments in Broadcom, which has a strong presence in both semiconductor solutions and infrastructure software. Broadcom leads in networking chips and ASICs, with the latter expected to gain market share in AI computing over the next few years. Wall Street anticipates a 21% annual growth in Broadcom’s earnings through 2026, making it an attractive investment for those looking to capitalize on the AI infrastructure build-out.