Jeff Yass is the co-founder of institutional money manager Susquehanna International Group (SIG). SIG specializes in quantitative trading and holds positions across many leading technology stocks.
While analyzing SIG's most recent 13F filing, I noticed something interesting. Namely, during the second quarter, the fund sold 52 million shares of Nvidia (NVDA 0.20%) -- reducing its position in the chip giant by about 73%.
At the same time, SIG increased its stake in Micron Technology (MU -1.75%) by 271% -- purchasing 3.5 million shares.
Below, I'm going to break down why I think swapping Nvidia for Micron makes sense right now, and more importantly, make the case for why Micron could be the more lucrative opportunity in the long run.
Why sell Nvidia stock right now?
Nvidia is the poster child of the chip industry, fueled by record growth from its graphics processing units (GPUs). Indeed, GPUs are a critical piece of infrastructure in generative AI development and Nvidia is widely considered to have the best products on the market.
Nevertheless, I wouldn't be resting on my laurels if I was in Nvidia's position. Many of the company's own customers, including Microsoft, Alphabet, Tesla, Meta Platforms, and Amazon, are all investing heavily in their own chip infrastructure. The introduction of more GPUs on the market makes forecasting Nvidia's growth prospects pretty challenging.
While I can't say how much Nvidia will be impacted by the competition, I do think it's fair to say the pace at which Nvidia's revenue and profits are growing will slow. I think it's this conundrum that has inspired some of Wall Street's brightest minds, including Ken Griffin of Citadel and David Shaw of D. E. Shaw, to reduce their positions in Nvidia in recent periods as well.
Although Nvidia should remain a leader in the AI realm for years to come, I am wary of the stock's long-run potential following its 227% rise over the last year.
Image source: Getty Images.
Why invest in Micron right now?
I'll concede right off the bat that the financial profile for Micron is tough to digest. The company's revenue trends experience noticeable peaks and valleys; meanwhile, Micron's profitability profile clearly hasn't reached a point of maturity yet.
MU Revenue (Quarterly) data by YCharts
Despite these financial inconsistencies, I see Micron as a particularly good bet on the long-run story surrounding AI.
Micron specializes in memory and storage solutions -- quite an important feature as pertains to training large language models (LLMs) and developing generative AI applications. Demand for memory solutions should witness a considerable surge as major cloud providers such as Amazon, Microsoft, Oracle, and Alphabet continue investing heavily into data center infrastructure and their own chips.
Considering many of these IT architecture projects will take years to build out and come to fruition, Micron looks well-positioned to benefit over the course of the next several years.
The future looks bright
At the end of the day, I still think keeping some exposure to Nvidia is a smart move. The company's upcoming launch of its Blackwell series GPUs should serve as a meaningful catalyst for at least the next year.
However, it's hard to know what Nvidia's growth is going to look like as the competitive landscape begins to come into focus.
By contrast, Micron hasn't really witnessed its full potential from AI tailwinds yet. In the long run, Micron could become a multibagger opportunity as revenue begins to accelerate at a steadier pace and profits begin to compound.
I think Susquehanna's decision to trim its position in Nvidia and take profits while also purchasing Micron stock is a particularly savvy decision and one that will pay off in spades over the long term.
