Activist hedge fund Elliot Management has sold its $4.5 million stake in GPU designer NVIDIA Corporation after calling the stock a bubble in an investor letter that surfaced earlier this month. Elliot is one of the more well known names on Wall Street due to its aggressive approach towards buying distressed securities and attempting to profit from them in the case of a turnaround. Its scathing investor letter, first reported by the Financial Times, had taken a bearish approach to artificial intelligence by bemoaning the lack of use cases for the new technology that has propelled NVIDIA's market value to record highs in 2024.
Elliot Management Sells ~$4.5 Million NVIDIA Stake After Sending Scathing Letter To Investors
The fund had taken an aggressive tone against NVIDIA in its investor letter, which included claims from some of AI's biggest detractors. As per the Financial Times, Elliot hadn't held back and stated that not only was NVIDIA a "bubble" but that the firm, along with its mega cap technology peers were all in "bubble land."
Elliot's decision to divest from NVIDIA comes after a rough hedge fund filings season for mega caps. Other notable moves in the second quarter include Bill Ackman's Pershing Square cutting its take in Google parent Alphabet by roughly 20% and Warren Buffett's Berkshire Hathaway slashing its Apple holdings in half.
Elliot Management had owned 50,000 NVIDIA shares during the first quarter, which amounted to a $4.5 million stake for the fund, whose SEC filings had revealed $16 billion in total investments. Now, its latest SEC filings show that it has sold all of its shares and eliminated NVIDIA from its investment portfolio.
However, this doesn't mean that the firm has completely given up on technology stocks. Its second quarter filings show that Elliot bought a $24.5 million stake in the British chip design house Arm. Arm's chip designs are used in smartphones, data centers and other computing chips and it was the target of a failed acquisition attempt by NVIDIA. Another notable stake of $89.7 million is in the storage company Western Digital, although it remained unchanged during the quarter.
Elliot's investor letter had bemoaned a lack of profitable applications of artificial intelligence. It outlined it belief that there "are few real uses" of AI apart from "summarising notes of meetings, generating reports and helping with computer coding."
The rush in big tech to buy NVIDIA's GPUs has created a shortage of the products. At the same time, broader macroeconomic concerns have weakened investor sentiment for the technology industry. NVIDIA is also allegedly suffering from the delays of its leading edge Blackwell AI GPUs, and Elliot, which believes that most AI use cases are "never going to be cost-efficient, are never going to actually work right, will take up too much energy, or will prove to be untrustworthy" added in its investor letter that the purported bubble in NVIDIA's stock could pop following a weak earnings report.
About the author: Ramish is a seasoned technology writer and editor with more than a decade of experience. He specializes in semiconductor fabrication and market analysis. With a background in finance and supply chain management - via his bachelors in Finance and a micromasters in supply chain management from MIT - Ramish combines financial rigor with deep industry insight to deliver accurate and authoritative coverage.
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