TLDR
- Nvidia expects global data center capital expenditures to reach $3 trillion to $4 trillion by 2030, up from around $600 billion today.
- GPUs have a lifespan of only one to three years, meaning chips purchased since 2023 are starting to burn out and need replacement.
- Citadel hedge fund increased its Nvidia position by 414% in Q2, adding more than 6.5 million shares worth approximately $1.5 billion.
- The stock trades at 42 times forward earnings and about 30 times next year’s earnings, which management considers reasonable given projected growth.
- Citadel simultaneously trimmed its Palantir position by 48%, signaling a strategic rebalancing toward AI infrastructure plays.
Nvidia posted another strong showing with institutional investors during the second quarter. Citadel, one of the most successful hedge funds in history, boosted its position by 414%.
The firm added more than 6.5 million shares. This brings Citadel’s stake to approximately $1.5 billion at current prices.
Founder and CEO Ken Griffin made the move while simultaneously trimming his Palantir position by 48%. The rebalancing shows a clear preference for AI infrastructure over software plays.
The timing makes sense. Nvidia management projects that global data center capital expenditures will hit $3 trillion to $4 trillion by 2030.
That’s up from around $600 billion today. The forecast came during the company’s second-quarter conference call.
Europe has barely started building out its AI capacity. The U.S. continues heavy spending on data centers.
China is also expanding its footprint. These factors support management’s aggressive projections.
AI hyperscalers have already announced that their 2026 capital expenditures will greatly exceed 2025 levels. Nvidia stands to benefit from this wave of spending.
The company has a $4.5 trillion market cap. It trades at 42 times forward earnings and about 30 times next year’s earnings.
Replacement Cycle Creates New Revenue Stream
GPUs don’t last forever in data centers. One Alphabet specialist estimated that GPUs have a lifespan between one and three years.
Chips purchased when the AI race began in 2023 are starting to burn out. This creates a new demand wave on top of expansion needs.
The replacement cycle means recurring revenue even after the initial AI buildout completes. Data centers run GPUs incredibly hard.
The stock has delivered outsized returns. A $10,000 investment made 10 years ago is now worth nearly $3 million.
If you bought 20 years ago, that same $10,000 investment is worth $6.9 million. The stock is up 1,220% since the AI race began in 2023.
Why Griffin Picked Nvidia Over Palantir
Palantir trades at a price-to-sales ratio of 135. The stock has soared more than 2,000% over the past three years.
Griffin’s decision to trim Palantir wasn’t about lost conviction. Hedge funds constantly reallocate capital by taking profits from winners that have run too far.
Famous investors like Stanley Druckenmiller and Cathie Wood have made similar moves with Palantir. Locking in gains provides flexibility to invest in better-valued opportunities.
Citadel’s growing Nvidia position signals that Griffin believes the next decade of computing will be defined by infrastructure providers. Those who control the hardware matter more than those who write algorithms.
Nvidia’s dominance extends beyond hardware. The company’s CUDA software platform has become a moat that locks developers into a computing standard few rivals can match.
Cloud infrastructure giants like Microsoft, Amazon, and Alphabet are collectively investing hundreds of billions annually. They need to expand data center capacity to keep pace with AI demand.
Nvidia’s partnerships with OpenAI, Intel, and Oracle are still in early stages. The company’s forthcoming GPU architectures—Blackwell Ultra and Rubin—extend its technological lead.
Griffin isn’t retreating from AI investments. He’s rebalancing his bets toward the infrastructure plays that support the entire ecosystem.
Citadel’s remaining Palantir stake is worth approximately $130 million at current prices. The firm still maintains exposure to the data analytics company despite the trim.
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