Nvidia It’s been a spectacular investment in recent years. Shares have soared more than 700% since January 2023 amid excitement around artificial intelligence (AI). But excitement is a double-edged sword. Numerous companies are designing custom AI chips, and some investors are worried that Nvidia will lose market share.
The following hedge fund billionaires have weathered the situation by selling Nvidia stock in the second quarter and redeploying capital in the Invesco QQQ Trust (NASDAQ: QQQ)a growth-focused index fund that tracks the Nasdaq 100 index.
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AQR Capital’s Cliff Asness sold 1.3 million shares of Nvidia, reducing his stake by 8%. He also bought 9,254 shares of Invesco QQQ Trust, increasing his stake by 332%.
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Steven Cohen of Point72 Asset Management sold 409,042 shares of Nvidia, reducing his stake by 16%. He also bought 1,500 shares of Invesco QQQ Trust, increasing his stake by 150%.
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Millennium Management’s Israel Englander sold 676,242 shares of Nvidia, reducing his stake by 5%. He also bought 81,616 shares of Invesco QQQ Trust, increasing his stake by 557%.
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Citadel Advisors’ Ken Griffin sold 9.2 million shares of Nvidia, reducing his holding by 79%. He also bought 2.8 million shares of Invesco QQQ Trust, increasing his stake by 585%.
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David Shaw of DE Shaw sold 12.1 million shares of Nvidia, reducing his holding by 52%. He also opened a small position in the Invesco QQQ trust.
It is important to note that these transactions do not indicate a complete lack of confidence in Nvidia. Not only do all five fund managers still hold positions in the chipmaker, but Nvidia is also the third largest position in the Invesco QQQ trust.
That said, their decision to buy the index fund is a sensible one because it diversifies their portfolios across more tech stocks that are likely to benefit from the rise of AI. Here’s what investors should know about the Invesco QQQ Trust.
The Invesco QQQ Trust offers strong exposure to technology stocks
The Invesco QQQ Trust measures the performance of the Nasdaq-100, an index that tracks the 100 largest non-financial companies on the Nasdaq Stock Market. The index fund is heavily weighted toward the information technology sector. The 10 largest holdings are listed by weighting:
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Apple: 8.9%
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Microsoft: 8.3%
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Nvidia: 7.7%
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Broadcom: 5.1%
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Amazon: 5.1%
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Meta Platforms: 4.8%
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Alphabet: 4.6%
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Tesla: 2.9%
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Costco Wholesale: 2.7%
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Netflix: 2%
Many investors see Nvidia as a role model in artificial intelligence (AI), as the company dominates the market for data center graphics processing units (GPUs) — chips that are the gold standard for accelerating complex workloads such as training machine learning models. But several other companies on that list are well-positioned to monetize AI.
For example, Microsoft, Amazon, and Alphabet have the three largest public clouds in the world, meaning they should be major beneficiaries as companies invest in the cloud infrastructure and platform services needed to train AI models and develop AI applications.
Similarly, Broadcom helps customers like Alphabet and Meta Platforms design custom AI chips and recently landed a major deal with OpenAI. This bodes well for the company because Morgan Stanley Analysts expect the custom AI chip market to grow faster than the GPU market through the end of the decade.
Finally, Tesla is engaged in the development of full self-driving (FSD) software and the company plans to monetize its FSD platform through subscription sales and robotaxi services.
Invesco QQQ Trust has generated supercharged returns over the past 20 years
The Invesco QQQ Trust has been an excellent long-term investment. The index fund returned 1,490% over the past 20 years, with a compound annual rate of 14.8%. In comparison, the S&P 500 Index (SNP INDEX: ^GSPC) returned 641% over the same period, with a CAGR of 10.5%.
The downside to the Invesco QQQ Trust is volatility. The fund is highly concentrated in technology stocks, so weakness in that sector of the market can trigger a sharp decline. The Invesco QQQ Trust has a 10-year beta of 1.12, meaning it moved 1.12 percentage points for every 1 percentage point move in the S&P 500.
Volatility has two faces. On the one hand, the Invesco QQQ Trust more than doubled the return of the S&P 500 over the past two decades. On the other hand, the Invesco QQQ Trust fell much more sharply than the S&P 500 during the most recent bear market. Specifically, the index fund suffered a maximum drop of 35%, while the S&P 500 never fell more than 24%.
The final item to note is the expense ratio. The Invesco QQQ Trust has an expense ratio of 0.2%, meaning investors will pay $2 a year for every $1,000 invested in the index fund. That’s below the industry average of 0.36%, according to Morning star.
Bottom line: Invesco QQQ Trust is a growth-focused index fund that tracks several companies well-positioned to benefit from the rise of artificial intelligence, including Nvidia. The index fund’s concentration in tech stocks makes it volatile, but that volatility has been an asset over the past two decades, given its outperformance of the S&P 500.
I believe the Invesco QQQ Trust will continue to outperform over the next decade as the AI boom unfolds. Patient investors who are comfortable with risk and volatility should consider buying a small position today. And shareholders should take advantage of market weakness by adding to their position during significant declines.
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John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Amazon, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, Meta Platforms, Microsoft, Netflix, Nvidia, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: January 2026 $395 call options on Microsoft and January 2026 $405 call options on Microsoft. The Motley Fool has a disclosure policy.
Billionaires Are Selling Nvidia Stock and Buying This AI-Powered Index Fund Instead was originally published by The Motley Fool