Citadel and DE Shaw slashed Nvidia holdings ahead of market rout

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Hedge funds Citadel and DE Shaw slashed their holdings in Nvidia ahead of this month’s stock market rout while Renaissance and Marshall Wace added to their positions, in a sign of sharp divisions among managers over the outlook for the chipmaking giant.

Citadel, the most successful hedge fund of all time, ditched around 9mn shares in the second quarter of this year to take its holding to $300mn at June end, down from $1bn at the end of March, according to US regulatory filings. DE Shaw more than halved its holding to $1.4bn worth of shares by the end of June.

And Paul Singer’s Elliott Management, which recently warned investors that Nvidia was in a “bubble” and AI was “overhyped”, ditched its entire holding of 50,000 shares.

However, quantitative firm Renaissance Technologies, founded by billionaire Jim Simons, picked up 1.5mn shares, building its position to 7mn shares, worth $867mn, by the end of June. London-based Marshall Wace bought around 3.7mn shares to value its holding at $1.5bn.

Frenzied investor interest pushed Nvidia up 150 per cent in the first half of this year, after the shares more than tripled last year, as demand to build out artificial intelligence capabilities drove huge orders for the company’s advanced semiconductors.

But in the market rout earlier this month it shed around $400bn in value in a space of minutes, as investors panicked over the outlook for the global economy, although the subsequent rebound has made back some of the ground since the June high.

“Tech stocks were a haven for investors and people were pulled along the way,” said Kevin Gordon, senior investment strategist at Charles Schwab, adding that the crowded trade “exacerbated [share price] moves to the downside”.

The positions were revealed in quarterly US regulatory filings giving a snapshot of hedge funds’ holdings at the end of June. It is unclear when and at what price funds traded Nvidia shares, and whether they had changed their positions by the time of the August sell-off.

The Financial Times analysed SEC filings from 23 major hedge funds holding a total of $1.4tn in US equities. On average they sold off around 6 per cent of their holdings in Nvidia, filings showed.

Man Group and Two Sigma collectively picked up 600,000 more Nvidia shares by the end of June.

Among other members of the so-called Magnificent Seven megacap tech stocks, funds on average added to positions in Apple and Microsoft while shedding some holdings in Alphabet, Amazon, Meta and Tesla.

The filings also reveal that hedge funds Baupost and Marshall Wace picked up $30mn and $20mn worth of shares respectively in Herbalife, the multilevel marketing company that was the subject of an ill-fated $1bn short bet by Pershing Square’s Bill Ackman more than a decade ago. Shorting means betting on a lower price for a stock.

Herbalife shares have plummeted in recent years, reaching a 15-year low during the second quarter of this year, while the market capitalisation has fallen to around $800mn, as the business undergoes a restructure.

Elsewhere, funds including Qube Research built positions in Robinhood. The retail investment platform was at the centre of the “meme stock” frenzy during the coronavirus pandemic.

Shares in Gamestop, one of the stocks at the centre of the frenzy, soared during the second quarter of this year after investor Keith Gill, known as Roaring Kitty, started posting on X for the first time since 2021 before declaring a $260mn position in the video game retailer.

Man Group, Marshall Wace, Two Sigma and Renaissance declined to comment. Baupost, Citadel, DE Shaw, Qube and Viking Global did not respond to a request for comment.