Many investors see Nvidia (NASDAQ: NVDA) as the quintessential artificial intelligence (AI) stock because its chips provide the computing horsepower needed to train the most advanced AI systems, such as OpenAI’s ChatGPT and Tesla‘s full self-driving software.

However, some hedge fund billionaires sold Nvidia stock during the first quarter, while purchasing shares of Palantir Technologies (NYSE: PLTR) and/or Super Micro Computer (NASDAQ: SMCI), two supercharged AI stocks with year-to-date returns of 59% and 198%, respectively.

• Louis Bacon of Moore Capital Management sold 2,006 shares of Nvidia in the first quarter, reducing his stake by 19%. Meanwhile, Bacon started a small position in Super Micro Computer.

• Israel Englander of Millennium Management sold 720,000 shares of Nvidia in the first quarter, reducing his stake by 35%. Meanwhile, Englander increased his positions in Palantir and Super Micro Computer by 4% and 235%, respectively.

• Philippe Laffont of Coatue Management sold 2.9 million shares of Nvidia in the first quarter, reducing his stake by 68%. Meanwhile, Laffont increased his position in Palantir by 40%.

Trades made by Israel Englander are especially noteworthy because Millennium Management handily beat the S&P 500 over the last three years , and it ranks as the second-best performing hedge fund of all-time as measured by net gains since inception. Here’s what investors should know about Palantir and Supermicro.

1. Palantir Technologies

Palantir specializes in data analytics. Its software lets government and commercial clients integrate data, develop (AI) and (ML) models, and build applications that lean on those data sets and models to improve decision-making. Palantir recently introduced its Artificial Intelligence Platform (AIP), a product that brings support for large language models and generative AI to its existing software.

Certain industry analysts have praised the company for its technological prowess. Forrester Research ranked Palantir Foundry as the best AI/ML platform in a report published in July 2022. And Dresner Advisory Services ranked Palantir as a leader in the AI/ML and data science market in a report published in August 2023.

However, other analysts are skeptical. Rishi Jaluria of RBC Capital says conversations with industry observers and company employees have led to the conclusion that Palantir does not offer “anything truly differentiated when it comes to generative AI.”

Palantir reported reasonably good financial results in the first quarter, beating estimates on the top line and meeting expectations on the bottom line. Its customer count increased 42% to 554, and the average existing customer spent 11% more. In turn, revenue increased 21% to $634 million, the third consecutive sequential acceleration, and non-GAAP earnings increased 60% to $0.08 per diluted share.

CFO Dave Glazer said the commercial segment benefited from “unprecedented demand driven by momentum from AIP.” However, the stock still slipped 7% following the first-quarter report because management guided for full-year revenue growth of 20%, implying a slight deceleration in the coming quarters. Analysts anticipated full-year revenue growth of 22%.

Going forward, Wall Street expects Palantir to grow adjusted earnings per share at 22% annually through 2026. That consensus estimate makes its current valuation of 97 times earnings look very expensive. Investors should be cautious with this stock. Personally, I plan to avoid Palantir until earnings growth accelerates or the valuation improves.

2. Super Micro Computer

Super Micro Computer designs high-performance computing platforms for enterprise and cloud data centers. Its portfolio includes servers and storage systems, ranging from individual devices to full rack solutions. Its products can be optimized for use cases like artificial intelligence and 5G infrastructure, and they feature chips like Nvidia graphics processing units (GPUs) and Intel central processing units (CPUs).

Importantly, Supermicro is the market leader in AI servers due to manufacturing prowess and its building-block approach to product development. To elaborate, nearly half of its workforce are engineers, and it handles most research and development internally. “Our engineering aptitude, coupled with our internal manufacturing capability, enables rapid prototyping and product roll-out.”

Additionally, Supermicro’s modular product design reduces time to market, and affords clients flexibility in designing custom solutions. It can “quickly assemble a broad portfolio of solutions by leveraging common building blocks across product lines.” In other words, Supermicro can rapidly integrate the latest CPUs, GPUs, and memory into preassembled server chassis, such that it often beats competitors to market by two to six months.

Indeed, Supermicro “anticipates being first-to-market in deploying full rack clusters featuring Nvidia Blackwell GPUs.” That is advantageous because businesses are eager to purchase AI hardware, so they are turning to the server maker that brings computing products to market at the fastest clip. As a result, Supermicro’s AI server market share is expected to reach 23% by the end of 2024, up from 10% at the beginning of the year.

Going forward, Wall Street expects Supermicro to grow earnings per share at 48% annually over the next three years. That consensus estimate makes its current valuation of 47 times earnings look very reasonable. Indeed, it gives a PEG ratio — the price-to-earnings ratio divided by the forecasted earnings growth — of roughly 1. For context, using the same methodology, Palantir currently has a PEG ratio of 4.4.

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has positions in Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions in and recommends Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a .

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Oppenheimer strategists have raised their year-end goal value for the to $5,900, up from $5,500, together with an elevated earnings projection for the index. This marks the agency’s third value goal adjustment for 2024, initially set at 5,200 final December 11.

The most recent bullish outlook is supported by S&P 500 earnings outcomes over the past three quarterly reporting durations, alongside financial information showcasing resilience, pushed by the Fed’s cautious financial coverage, Oppenheimer famous.

“An innovation cycle that might profit all 11 sectors of the S&P 500 that exhibits indicators of being each cyclical and secular coupled with cross generational demographic wants that counsel a shift in mindset relating to equities that seems pushed provides in our view additional assist to the case for equities right now,” strategists stated.

On March 25, after the S&P 500 surpassed the preliminary 5,200 goal, the strategists hinted at the potential of one other upward revision ought to their financial and market outlook show too conservative.

With the S&P 500 lately closing at a document excessive of 5567.19, the brand new goal of 5,900 implies a possible acquire of just below 6% from the present degree, strategists identified. This forecast considers typical uncertainties associated to financial information, earnings outcomes, and home and geopolitical dangers.

When Oppenheimer first set the goal final December, it projected a 13% upside for the S&P 500 by year-end, based mostly on expectations of the Federal Reserve sustaining a cautious strategy in fulfilling its mandate.

The funding financial institution anticipated the Fed would proceed its pause on charge hikes, initiated in June 2023, and regardless of some financial slowing, noticed a decrease chance of recession because of persistent financial resilience and the Fed’s sensitivity to higher-than-expected inflation, which made the two% inflation goal elusive.

On the finish of final 12 months, Oppenheimer anticipated one or two charge cuts from the Fed, one lower than the three forecasted by the Fed in December, and considerably fewer than the cuts priced in by the Fed Fund Futures at the moment.

“Now simply days previous the mid-year level of 2024 we anticipate the Fed to chop a few times late within the fourth quarter as a “good religion down cost” for Fundamental Avenue and Wall Avenue signaling that the central financial institution is getting nearer to an finish of the present charge hike cycle if not fairly there but,” strategists continued.

“We might be shocked if the Fed have been to chop rates of interest as early as September as quite a lot of market members predict based mostly on the futures that observe Fed funds charge expectations,” they stated, including Powell and his colleagues seemingly need to preserve Fed coverage unbiased of politics.

Alongside a year-end value goal hike, Oppenheimer additionally raised its 2024 earnings projection for the S&P 500 to $255, up from $250.

The S&P 500 (SNPINDEX: ^GSPC) is extensively considered the most effective barometer for the general U.S. inventory market as a result of its scope and variety. The index measures the efficiency of 500 massive corporations that cowl 80% of U.S. equities by market capitalization.

The S&P 500 superior 14% in the course of the first half of 2024, outpacing the historic common of 5%, and one inventory market indicator says the index is headed even increased within the coming months. Particularly, throughout presidential election years involving an incumbent (a president working for reelection), the S&P 500 has all the time — 100% of the time — generated a optimistic return within the second half of the yr.

Here is what buyers have to know.

Historical past says the S&P 500 might climb 11% within the second half of 2024

There have been 16 presidential elections for the reason that was created in 1957, half of which concerned an incumbent president working for a second time period. As talked about, the index has all the time been a worthwhile funding in the course of the second half of election years involving an incumbent, no matter which presidential candidate gained the election.

The chart beneath exhibits the S&P 500’s return within the second half of each presidential election yr. Reelection years (years through which an incumbent was working for reelection) are marked with an asterisk.

Knowledge supply: YCharts. The desk exhibits the S&P 500’s return within the second half of all presidential election years for the reason that index was created in 1957. Asterisks denote reelection years, which means an incumbent president was working for a second time period.

As proven above, throughout presidential election years, the S&P 500 returned a mean 4% in the course of the second half. Nevertheless, if the outcomes are restricted to years when an incumbent president was working for reelection, as Joe Biden is in 2024, the S&P 500 returned a mean of 11% in the course of the second half.

Which will sound contrived, however Jeff Buchbinder at LPL Monetary supplied this logical rationalization in a latest weblog put up. “We imagine this sample is partly because of the incumbent priming the pump forward of the election with fiscal stimulus and pro-growth regulatory insurance policies to stave off potential recession and encourage jobs progress.” Nevertheless, he additionally famous that Biden has restricted alternatives to prime the pump on condition that Republicans management the Home.

Regardless, historical past says the S&P 500 might return roughly 11% within the second half of 2024. The index has already superior 2% in July, leaving implied upside of 9% by way of December.

That mentioned, previous outcomes are by no means a assure of future returns. will finally decide how the inventory market performs within the remaining months of 2024.

Historical past says the S&P 500 might soar when the Federal Reserve cuts rates of interest

Wall Avenue will monitor labor market and inflation information intently within the coming months, awaiting proof the financial system is headed for a gentle touchdown, a situation through which the Federal Reserve brings inflation again to its 2% goal with out tipping the financial system right into a recession.

In June 2022, inflation reached a four-decade excessive of 9.8% as a result of provide chain disruptions and stimulus applications associated to Covid-19. The Federal Reserve responded with its most aggressive rate-hiking cycle for the reason that early Nineteen Eighties, and the federal funds fee now sits at a 23-year excessive. That’s doubtlessly problematic for the inventory market as a result of shoppers and companies spend much less when borrowing prices are elevated, which suppresses company earnings progress.

On the brilliant aspect, inflation dropped to three.3% in Might 2024. However pricing pressures haven’t eased sufficient to warrant the lengthy awaited loosening cycle (a interval when the Federal Reserve is slicing rates of interest). So, buyers are hoping inflation continues trending towards its 2% goal, whereas different information factors — equivalent to job openings and unemployment — present a regularly cooling, however nonetheless wholesome financial system.

In that situation, the Federal Reserve could lower rates of interest later this yr, and the financial system can also keep away from a recession. Such a decision has traditionally been excellent news for the inventory market. Through the seven loosening cycles since 1987, the S&P 500 returned a mean 6% in the course of the 12 months following the primary fee lower. However the common return was 16% throughout that 12-month interval if the financial system averted a recession.

Buyers ought to give attention to long-term good points, not short-term actions within the inventory market

Buyers can put cash to work within the inventory market right this moment figuring out historical past is on their aspect. Certainly, the S&P 500 will return 11% in the course of the second half of 2024 if its efficiency aligns exactly with the historic common. In fact, no inventory market indicator is infallible, so buyers ought to be cognizant of the dangers.

If the Federal Reserve retains rates of interest elevated all through the remaining months yr, or if the financial system sinks right into a recession, the S&P 500 might simply decline within the second half of 2024. For that cause, buyers ought to stick with a buy-and-hold technique that goals to seize long-term capital good points.

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has no place in any of the shares talked about. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a .

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