In mid-August, Wall Street received its most important data dump of the third quarter – and I’m not talking about an inflation report from the Bureau of Labor Statistics.

August 14 marked the deadline for institutional investors and asset managers with at least $100 million in assets under management to file Form 13F with the Securities and Exchange Commission. A 13F provides a behind-the-scenes look at what stocks Wall Street’s smartest and most successful money managers bought and sold in the most recent quarter (in this case, the June quarter).

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Although 13Fs have their weaknesses – e.g. B. They are typically 45 days old at the time of filing, which can result in outdated data for active funds – they are invaluable in helping investors figure out which stocks, industries, sectors, etc. are trending the interest of Wall Street’s top asset managers.

Billionaire Israel Englander of Millennium Management is one of the prominent asset managers that investors tend to pay close attention to. Based on Millennium’s most recent 13F, Englander and his team oversee nearly $216 billion in securities under management spread across thousands of positions, including various put and call options.

But what stands out most about Englander’s trading activity in the June quarter is his approach to artificial intelligence (AI) stocks. Englander pitched shares of two of Wall Street’s most popular AI stocks to great success, while also investing in another historically cheap AI company that is facing serious headwinds.

England’s Millennium sends shares of Nvidia and Palantir to the chopping block

The two hugely popular artificial intelligence stocks that England’s Millennium Management cut in the second quarter are semiconductor giants Nvidia (NVDA 2.45%) and cloud-based data mining specialist Palantir Technologies (PLTR -0.16%).

Millennium has held shares in Nvidia since 2008, making it undoubtedly one of the main beneficiaries of the AI ​​revolution. But during the June quarter, Englander’s fund reduced its position in Nvidia by 676,242 shares.

It’s entirely possible that this is just simple profit-taking and asset reallocation. Nvidia has grown from a $360 billion company to a $3.25 trillion company by the end of 2022 when the closing bell rang on October 9, 2024. Locking in profits after a near parabolic rise seems like a smart move.

But there are other concerns that could force Englander to reduce Millennium’s stake in Nvidia. For example, although Nvidia’s AI graphics processors (GPUs) are the undisputed first choice as the “brains” of AI-accelerated data centers, external and internal competition is increasing. In particular, Nvidia’s fourth-largest customers by net revenue are developing AI GPUs internally for use in their data centers. This suggests that future opportunities to capture valuable data center real estate will be limited for the AI ​​hardware boss.

History has also been incredibly unkind to leading companies with pioneering innovations. Investors have overestimated the utility and adoption of every breakthrough technology over the past 30 years, and AI is unlikely to be an exception to this unwritten rule.

In addition to selling Nvidia shares, the Englander fund reduced its stake in Palantir Technologies by 7,074,815 shares. Millennium has been a continuous holder of Palantir shares since its IPO in 2020.

On the one hand, Palantir is riding the wave of irreplaceability to astronomical profits. The company’s AI-driven Gotham platform, which collects data and helps with mission planning for federal governments, has no competition at scale when coupled with its enterprise-focused Foundry platform. Wall Street often rewards companies with sustainable market moats with top-notch valuations.

But at some point, even with a sustainable moat, a bad review can become a hard pill to swallow. As of October 9, Palantir was valued at 100 times future year earnings per share (EPS) and a staggering 35 times forecast current year sales. With annual revenue growth of around 20%, it’s almost impossible to justify this valuation.

Furthermore, the long-term potential of Palantir’s Gotham segment is of course limited. This is a platform that Palantir leadership will only allow access to the US and its allies. This means that future growth and profits will depend heavily on Foundry. While this isn’t a bad thing, Foundry is still in the very early stages of expansion, making Palantir’s $96.6 billion market cap an eyesore.

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Here’s the historically cheap AI stock Israel Englander can’t stop buying

While Englander has been a busy seller of two of Wall Street’s top artificial intelligence stocks, he has also been an eager buyer of a stunningly cheap AI stock whose future prospects have dimmed in recent months. I’m talking about a specialist in customizable rack servers and storage solutions Super microcomputer (SMCI -1.85%).

Adjusted for Super Micro’s 10-for-1 stock split two weeks ago, Englander’s Millennium Management purchased 5,533,230 shares in the second quarter, increasing the fund’s existing stake in the company by more than 800% since the end of March.

Just as Nvidia has become the preferred provider of AI GPUs for high-performance data centers, Super Micro Computer is a top infrastructure provider for companies looking to expand their AI data centers. Super Micro integrates Nvidia’s highly popular H100 GPU into its customizable rack servers, increasing the appeal of its solutions.

In fiscal 2024, which ended June 30, the company achieved net sales growth of 110% to $14.94 billion. For fiscal year 2025, Super Micro’s median revenue forecast is $28 billion. Despite a forecast annual earnings growth rate of 62% through fiscal 2029, the company’s shares currently trade at less than 11 times fiscal 2026 EPS.

The reason Super Micro Computer shares aren’t trading at a more aggressive premium given its high growth projections is increasing headwinds. For example, it was the target of a short seller report from Hindenburg Research in late August. Hindenburg accused Super Micro of “accounting manipulation.” Although the company has denied these allegations, it also delayed filing its annual report and is reportedly facing an early investigation by the U.S. Department of Justice.

There are also concerns that supply chains could impact Super Micro Computer’s ability to meet its customers’ needs. Nvidia’s H100 GPUs are in such high demand that Super Micro’s rack servers could fall victim to backorders.

Suffice it to say that despite its relative cheapness, Super Micro Computer is a risky bet for Englander and Millennium Management.