Nvidia has been a spectacular investment in recent years. The stock has soared more than 700% since January 2023 amid excitement around artificial intelligence (AI). But excitement is a double-edged sword. Many companies are now design custom AI chipsand some investors fear Nvidia will lose Market share.
The following hedge fund billionaires weathered the storm by selling Nvidia shares in the second quarter and redeploying capital into the Invesco QQQ Trust (NASDAQ: QQQ)a growth-oriented index fund that tracks the performance of Nasdaq-100 hint.
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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 position 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 the Invesco QQQ Trust, increasing his position 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 position by 557%.
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Ken Griffin of Citadel Advisors sold 9.2 million shares of Nvidia, reducing his stake by 79%. He also bought 2.8 million shares of the Invesco QQQ Trust, increasing his position by 585%.
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David Shaw of DE Shaw sold 12.1 million shares of Nvidia, reducing his stake by 52%. He also opened a small position in the Invesco QQQ Trust.
It’s important to note that these trades don’t signal 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 smart one because it helps diversify their portfolios by focusing more on tech stocks that could benefit from the rise of AI. Here’s what investors need to know about the Invesco QQQ Trust.
Invesco QQQ Trust Fund 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 Exchange. The index fund is heavily weighted toward the information technology sector. The top 10 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 view Nvidia as a poster child for artificial intelligence (AI) because the company dominates the market for data center graphics processing units (GPUs), chips that are the gold standard for accelerating complex workloads like training machine learning models. But several other companies on this list are well-positioned to monetize AI.
For example, Microsoft, Amazon, and Alphabet own the three largest public clouds in the world, and are expected to be the main 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 won a major contract 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 by the end of the decade.
Finally, Tesla is focused on developing fully self-driving (FSD) software, and the company plans to monetize its FSD platform through subscription sales and robotaxi services.
The Invesco QQQ Trust fund has generated exceptional returns over the past 20 years
The Invesco QQQ Trust fund is a great long-term investment. The index fund has returned 1,490% over the past 20 years, with a compound return of 14.8% per year. In comparison, the S&P 500 (SNPINDEX: ^GSPC) returned 641% over the same period, with an annual compound return of 10.5%.
The downside of the Invesco QQQ fund is its volatility. The fund is heavily concentrated in technology stocks, so weakness in that sector of the market can cause it to plummet. The Invesco QQQ fund has a 10-year beta of 1.12, meaning it has moved 1.12 percentage points for every 1 percentage point move in the S&P 500.
Volatility is a double-edged reality. On the one hand, the Invesco QQQ Trust has 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 last bear market. Specifically, the index fund suffered a maximum decline of 35%, while the S&P 500 never fell more than 24%.
The last item to note is the expense ratio. The Invesco QQQ Trust has an expense ratio of 0.2%, meaning investors will pay $2 per year for every $1,000 invested in the index fund. That’s lower than the industry average of 0.36%, according to Morningstar.
Bottom line: The Invesco QQQ Trust is a growth-oriented index fund that tracks several companies well-positioned to benefit from the rise of artificial intelligence, including Nvidia. The index fund’s concentration in technology stocks makes it volatile, but that volatility has been a plus 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 comfortable with risk and volatility should consider buying a small position today. And shareholders should take advantage of market weakness by adding to their positions during significant pullbacks.
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John Mackey, former CEO of Amazon’s Whole Foods Market, 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: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a position in Amazon, Nvidia, and Tesla. disclosure policy.
Billionaires Are Selling Nvidia Stock, Buying This Supercharged AI Index Fund Instead was originally published by The Motley Fool