Every quarter, investors eagerly await the release of Form 13Fs with the Securities and Exchange Commission (SEC) – akin to Christmas for the financial world. These 13Fs provide a detailed window into the stocks bought and sold by the top money managers on Wall Street. It unveils the stocks, industries, and trends capturing the attention of the brightest asset managers in the financial arena.
Of high interest currently, is ascertaining the holdings of billionaire investors in the arena of artificial intelligence (AI) stocks. AI, known for its potential to add an estimated $15.7 trillion to global gross domestic product by 2030, is at the forefront of investment discussions. The latest round of 13F filings revealed billionaire investors eagerly reducing their stakes in two ultra-popular AI stocks and acquiring shares of another eminent AI-inspired company.
AI Stock No. 1: Nvidia Faces the Brunt of Sell-Offs
The first AI stock prominent billionaire investors are shedding is the infrastructure powerhouse, Nvidia (NASDAQ: NVDA). During the fourth quarter, eight billionaires distinctly curtailed their holdings in this semiconductor giant. Notable selloffs include:
- Israel Englander of Millennium Management (1,689,322 shares)
- Jeff Yass of Susquehanna International (1,170,611 shares)
- Steven Cohen of Point72 Asset Management (1,088,821 shares)
- David Tepper of Appaloosa Management (235,000 shares)
- Philippe Laffont of Coatue Management (218,839 shares)
- Chase Coleman of Tiger Global Management (142,900 shares)
- John Overdeck and David Siegel of Two Sigma Investments (30,663 shares)
The exodus reflects concerns about increasing competition and margin cannibalization. Nvidia’s A100 and H100 graphics processing units (GPUs) currently dominate AI-accelerated data centers. Citigroup analysts estimated that Nvidia’s chips could cover a 90% share of GPUs in high-compute data centers this year. However, intensifying competition, particularly from Advanced Micro Devices and Intel, poses a challenge. Moreover, internal competition from Microsoft and Meta Platforms, which are developing their own AI chips, adds to the pressure.
Nvidia’s expansion may inadvertently compromise its gross margins. The company’s data-center growth in fiscal 2024 resulted largely from A100 and H100 GPU scarcity. As production ramps up, it risks cannibalizing its own pricing power.
AI Stock No. 2: Microsoft Faces a Billionaire Exodus
Another AI stock subjected to billionaire sell-offs is tech behemoth Microsoft. Seven notable billionaires reduced their stakes during Q4, including:
- OIe Andreas Halvorsen of Viking Global Investors (3,024,399 shares)
- Steven Cohen of Point72 Asset Management (1,569,462 shares)
- Jim Simons of Renaissance Technologies (1,155,782 shares)
- Ken Griffin of Citadel Advisors (796,892 shares)
- Chase Coleman of Tiger Global Management (787,113 shares)
- Terry Smith of Fundsmith (705,498 shares)
- Dan Loeb of Third Point (210,000 shares)
Viking Global and Renaissance Technologies entirely exited their stakes in the tech titan. The reasons behind these sales stem from historical investment trends and potential valuation concerns. Investors are currently facing a multiple of 31 times forward-year earnings, significantly higher than the 16 to 25 times between 2014 and 2018.
The fantastic cash flow position of Microsoft, driven by legacy segments like Windows and Office, combined with high-growth initiatives like Azure, could challenge the decision of the selling billionaires. This blend allows Microsoft to take chances on acquisitions and innovation.
Unwavering Billionaire Interest in AI Stock: Amazon Dominates
Not every AI stock faced sell-offs by billionaire money managers in Q4. E-commerce titan Amazon (NASDAQ: AMZN) emerged as a sought-after investment. Eight billionaires, including names such as Ken Griffin of Citadel Advisors and Jim Simons of Renaissance Technologies, significantly increased their holdings in the company. These investments align with Amazon’s utilization of AI for voice interactions with Alexa and personalized advertising for merchants.
Amazon: A Lure for Billionaires
The Billionaires’ Bandwagon
Amazon, a magnet for the elite, witnessed a plethora of prominent billionaires hoarding the company’s stock in the final quarter. The star-studded list includes ARK Investment Management’s Cathie Wood, who amassed 154,794 shares, Tiger Global Management’s Chase Coleman, holding 947,440 shares, and Ken Fisher of Fisher Asset Management, who secured 888,369 shares, among others. This celebrity endorsement is not just due to Amazon’s AI innovations but also because of its swiftly growing ancillary segments.
The Amazon Appeal
While Amazon’s extensive online marketplace may be its most recognizable facet, its online retail sales yield meager margins. The real cash cow for Amazon is its cloud-infrastructure service segment, Amazon Web Services (AWS), alongside subscription and advertising services. AWS, the unrivaled cloud-infrastructure services provider worldwide, stands on the cusp of a $97 billion annual run rate in sales. The ineffable allure of cloud services lies in their burgeoning enterprise expenditure and their substantial margins, far outshining those of e-commerce. In fact, AWS often accounts for over half of Amazon’s operating income.
Valuation – The Vanguard of Attraction
Another pivotal aspect that fueled the billionaires’ fervor for Amazon in the fourth quarter is its valuation. Despite its conventional price-to-earnings ratio not being a value investor’s cup of tea, Amazon’s valuation appears modest in relation to its cash flow. Operating cash flow, rather than traditional metrics, is the judicious yardstick for valuing Amazon, given its proclivity to reinvest most of its operating cash back into its high-growth initiatives. After lingering at 23-37 times year-end cash flow for the entire past decade, investors currently have the opportunity to acquire shares at around 12 times the consensus cash-flow estimates for 2025.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Citigroup is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Sean Williams has positions in Amazon, Intel, and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short February 2024 $47 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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