Hedge funds and Baron Capital are sending very different signals on Advanced Energy Industries, Inc. (NASDAQ:AEIS). Insider Monkey’s database shows massive growth of 52% in the number of hedge funds holding AEIS in Q2. However, Baron Discovery Fund went the other way, selling about 60% of its investment at roughly $375.
AI Demand Is Hitting Two Businesses at Once
Q2 revenue jumped 30% year over year to $574 million, while semiconductor revenue rose 33% to a record. Management said on August 3 that it now expects Data Center Computing revenue to grow at least 50% for the full year as hyperscaler demand strengthens.
That gives Advanced Energy two ways to benefit from the same AI spending cycle. It sells power systems into data center computing, while its semiconductor business benefits from investment in the wafer-fab equipment needed to make increasingly complex chips.
The next leg could come from 800-volt data center architectures. Advanced Energy has developed modular DC-to-DC and AC-to-DC products for those systems. Early production units are being evaluated by customers, with initial production revenue expected in late 2027 and a more meaningful ramp in 2028.
Baron Thinks the Valuation Has Run Ahead
Baron said it sold roughly 60% of its Advanced Energy Industries, Inc. (NASDAQ:AEIS) position at $375 because the stock was approaching its long-term price target and had grown to nearly 4% of the portfolio.
That is a serious counterargument because Baron did not turn bearish on the business. The fund still likes Advanced Energy and said it would consider adding at lower prices. Its concern is what investors are already paying for the growth.
The 800V opportunity also remains mostly future revenue, leaving the stock dependent on current hyperscaler and semiconductor momentum to support its valuation until that next product cycle arrives.
Hedge Fund Interest Exploded
Insider Monkey’s database showed 70 hedge fund portfolios held AEIS at the end of Q2 2026, up from 45 in Q1 2026. D.E. Shaw increased its position by a whopping 36,499% to 585,573 shares, while AQR Capital Management increased its stake 135% and Millennium Management added 26%. Short interest was 1.88 million shares as of July 31, equal to 4.75% of public float, with 2.5 days to cover.
The Bottom Line
Advanced Energy’s AI demand is obvious, but growth has to stay strong enough to support a stock that has already rerated sharply. So far, the operating numbers are keeping pace. Data center growth is accelerating, semiconductor demand is at record levels, and 800V gives the company another shot at increasing content per rack later in the cycle.
READ NEXT: NVIDIA (NVDA): What Foxconn and Super Micro Are Telling Us about the AI Boom and Pony AI Is Scaling Robotaxis Fast—Can the Stock Reach BofA’s $17 Target?
Disclosure: None. Follow Insider Monkey on Google News.
