Dan Sundheim’s D1 Capital buys AI-linked names in third quarter

D1 Capital Adds AI-Related Stocks in Q3, Signaling Growth Opportunities for Investors

Imagine picking teams for a big game—you want the best players, but sometimes those star players are having an off week. That’s a lot like what’s happening in the stock market with some big tech names right now.

What’s Happening?

D1 Capital, a large hedge fund run by Daniel Sundheim, recently bought shares in several companies tied to artificial intelligence (AI). These include famous names like Nvidia and Meta Platforms, as well as Broadcom and Synopsys. These companies have helped push the stock market higher this year, earning the nickname “Magnificent Seven.”

Even though D1 Capital’s bets on these four stocks weren’t its biggest, they still put a lot of money into them. For example, they invested over $220 million in Broadcom and almost $200 million in Meta. Nvidia and Synopsys got $115 million and $77 million, respectively.

Why Investors Care

For investors, this matters because big funds like D1 can move markets. Their choices can show where the “smart money” thinks the next big thing will be. But, just like a sports team can go through a losing streak, even the best stocks can drop in value.

Bulls: The Good Side

  • AI Growth: These companies are leaders in AI, a technology expected to change many industries.
  • Track Record: According to Statista, the global AI market is projected to reach over $1.8 trillion by 2030—huge growth ahead.
  • Past Performance: Stocks like Nvidia and Meta have helped the S&P 500 rise more than 14% this year, and Reddit’s shares are up over 18% year-to-date.

Bears: The Risks

  • Bubble Concerns: Some investors worry these stocks are too expensive compared to their earnings. This can mean bigger drops if things go wrong.
  • Recent Losses: In November, all four of these stocks have fallen. Synopsys is down 14%, Broadcom over 7%, and both Nvidia and Meta about 6%.
  • Volatility: AI stocks can swing up and down quickly. If the hype cools off, prices might drop further.
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Other Moves by D1 Capital

D1 Capital didn’t just buy AI stocks. They increased their holdings in AppLovin (now worth over $601 million) and Reddit ($465 million). AppLovin is down over 12% this month, but Reddit has outperformed the S&P 500. Instacart is the fund’s biggest position, at over $829 million. Sundheim is even on Instacart’s board, showing real belief in the company.

On the other hand, D1 sold some of its shares in financial companies like Bank of America, Capital One, and Apollo Global Management. This could mean they see better opportunities in tech than in banking right now.

Investor Takeaway

  • Watch AI Leaders: Keep an eye on top AI stocks, but remember they can be risky if prices get too high.
  • Diversify: Don’t put all your eggs in one basket. Even big funds spread their bets across tech, social media, and grocery delivery.
  • Be Ready for Ups and Downs: Tech stocks can move fast—both up and down. Have a plan for what you’ll do if they drop.
  • Learn from the Pros: See what big funds are buying and selling, but always do your own homework before investing.
  • Focus on Long-Term Trends: AI is a big deal for the future, but short-term bumps are normal. Think about where these companies will be in five or ten years.

For the full original report, see CNBC

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