Billionaire Paul Singer Just Sold Nvidia to Buy This Chip Stock

Core Viewpoint - Elliott Investment Management, led by billionaire Paul Singer, has shifted its investment focus from Nvidia to Arm Holdings, indicating a strategic pivot in the tech sector [1][5]. Group 1: Investment Strategy - Elliott has been involved in discussions with Starbucks and has taken an active role in Southwest Airlines, showcasing its aggressive investment approach [1]. - The fund sold its shares in Nvidia, citing concerns over AI being "overhyped" and the technology's energy inefficiency, while initiating a new position in Arm Holdings [1][4]. - Elliott's investment in Arm may also be linked to its stake in Softbank, which owns approximately 90% of Arm, suggesting a broader strategy involving both companies [5][6]. Group 2: Arm Holdings Overview - Arm's technology is integral to nearly all smartphones globally, differentiating its business model from Nvidia by licensing technology rather than designing its own chips [2]. - The company has transitioned to a subscription model for its intellectual property, with 33 customers on the Arm Total Access platform and 241 on the Arm Flexible Access platform as of Q2 [3]. - Arm aims to capture at least 50% of the Windows-based PC market within five years and has seen a 28% growth in the automotive sector in Q2 [3]. Group 3: AI and Market Position - Despite Elliott's skepticism about AI, Arm is benefiting from increased licensing in AI data centers, indicating a nuanced position in the AI landscape [4]. - Arm collaborates with Nvidia on the Grace Hopper chip, integrating Arm-based CPUs with Nvidia GPUs, and has seen its technology adopted by major companies like Alphabet and Amazon for new data center chips [4]. - Arm's stock trades at a forward P/E ratio of 63.5 based on 2025 estimates, reflecting a premium valuation compared to Nvidia, but its business model allows for long-term royalty income [6]. Group 4: Market Sentiment - Following a recent pullback in Arm's stock price, it is viewed as more attractive, although a cautious approach is recommended for future investments due to its high valuation [7].