Citadel Advisors Cut Stakes in Nvidia, Microsoft and Amazon Despite AI Rally — But Held Onto Tesla and Meta

US hedge funds made major changes to their portfolios in Q1 in a highly volatile stock market amid geopolitical instability and supply chain risks due to the Middle East conflict.

Despite the AI boom, hedge funds placed mixed trades when it came to Mag 7 stocks. Kenneth Griffin's Citadel Advisors sold massive stakes in companies like Nvidia, Alphabet, Microsoft, Apple, and Amazon but bumped its holdings considerably in Meta Platforms and Elon Musk's Tesla.

Griffin, founder and CEO of Citadel Advisors, is known for his open-mindedness toward diverse asset classes and his quantitative investing approach. His personal net worth is estimated at $50.7 billion, according to Forbes.

In Q1, Citadel sold 2.9 million shares of Nvidia, 6 million shares in Amazon, 307,000 shares of Apple, 625,000 shares of Microsoft, and 77,500 Class A shares of Alphabet. However, the Amazon stock is up 14.4% year-to-date, while Nvidia, Apple, and Alphabet shares rose 20.8%, 10.4%, and 26.7% YTD, respectively. Note that Microsoft shares fell 12.7% in the same period.

In the same quarter, Citadel purchased 1.2 million shares of Tesla, boosting its stake in the EV maker by 134.7%. The hedge fund also bought 1 million shares of Meta Platforms, bumping its stake by 128.5% in Q1.

Other hedge funds, including Cathie Wood's Ark Invest, billionaire investor David Tepper's Appaloosa, and Steve Cohen's Point72 Asset Management, also sold Nvidia shares during the quarter, which UBS analyst Tim Arcuri believes could be linked to apathy on 'this stock' despite high investor interest.

AI Faces Challenges, but Outlook Bright

As investors await details of deals Nvidia made in China from CEO Jensen Huang, Bank of America's Vivek Arya added that investors are also expecting commentary on Nvidia's rivals in the chip design segment.

Nvidia will report its quarterly results on Wednesday. This past week, the company surpassed the $5.7 trillion valuation mark, reaffirming the chipmaker's place as the largest company in the world.

Meanwhile, Carlyle Group's Jeff Curries stated in an X thread late last week that the AI trade faces physical bottlenecks in energy, metals, and compute capacity despite the Mag 7 firm plans capital expenditures of over $700 billion collectively in 2026 alone.

However, he believes a stock market rally is upcoming for commodities, but it would be 'the most asymmetric trade in modern financial history.'

'The opportunity exists because capital has chased the AI trade while ignoring the physical assets AI requires to run — assets that have quietly become the best-performing asset class of the decade,' he wrote.

While it is unclear why Citadel Advisors has been reducing exposure to the technology sector, especially when the US and China are searching for stability, the Q1 stock trades could simply be an act of portfolio rebalancing. Note that the hedge fund ramped up its stake in iShares Core S&P 500 ETF by 5,363% in Q1, implying an attempt to diversify holdings across industries.

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