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Investor Insights: Billionaires Make Moves in the Market

Investor Insights: Billionaires Make Moves in the Market

The Billionaire Backlash: Meta Platforms

First in line to face the music was Meta Platforms, where six billionaire money managers reduced their stakes, including a notable decrease by Jeff Yass of Susquehanna International at 3,037,082 shares.

  • Adverse economic conditions have billionaires apprehensive about the future revenue of Meta, as almost 98% of the company’s revenue comes from advertising on their social platforms.
  • It’s worth noting that despite Meta’s significant appreciation, the stock remains historically inexpensive, with a 20% discount to its average price-to-cash-flow multiple over the past five years.

The Alphabet Exodus

The Alphabet was another bloodbath for billionaires, with seven asset managers offloading shares, including Philippe Laffont of Coatue Management at 3,302,342 shares.

  • Concerns about the health of the U.S. economy are likely driving the sell-off, given the company’s reliance on advertising on Google search, Google Network, and YouTube.
  • Despite this, Alphabet’s supremacy in the global internet search market and its high-margin cloud business leaves it well-positioned for sustained growth.

Nvidia Takes a Hit

The third target for billionaire selling was Nvidia, with eight prominent investors shedding shares, including a significant reduction from Israel Englander of Millennium Management at 1,689,322 shares.

  • Emerging competition in the graphics processing unit (GPU) arena has likely prompted fears among billionaires, with the company facing increasing competition from external rivals and its own customer base developing their AI chips.

The Frenzy of Billionaires Embracing Amazon: A Sign of Stability or Premonition of Trouble?

Shifting Securities and the AI-GPU Scarcity

The monumental shift in securities has brought forth a conundrum, leaping from the fervor for Microsoft and Meta Platforms. There is a tangible apprehension that Nvidia could erode its gross margin as it proliferates the production of A100 and H100 AI-GPU chips. The humble rise in cost of revenue, contrasted with an 86% surge in sales in the initial three quarters of fiscal 2024, unequivocally portrays Nvidia’s formidable pricing hegemony. Once the GPU scarcity abates, a decline in its gross margin looms perilously on the horizon.

Furthermore, history echoes that every successive trend of mammoth proportions in the past three decades has meandered through an embryonic bubble. Looking back, it becomes unmistakably evident that investors habitually overestimate the adoption of AI, reminiscent of the overexuberance that characterized previous “next-big-thing” trends over the past 30 years.

The Magnificent Seven: A Billionaire Bonanza on Amazon

Conversely, amidst this financial frenzy, one stock stands as a bastion of stability. During the quarter ending in December, eight billionaires voraciously devoured shares of the e-commerce juggernaut, Amazon. These included luminaries such as Ken Griffin of Citadel Advisors, Jim Simons of Renaissance Technologies, and Chase Coleman of Tiger Global Management, among others. Quite fascinatingly, the allure of Amazon for these billionaires springs from the realization that its business isn’t as tethered to e-commerce as commonly perceived. While online retail constitutes a substantial chunk of Amazon’s sales, it yields meager margins. Ergo, any slump in online retail sales due to a stumbling U.S. economy will have a negligible impact on Amazon’s cash flow.

Comparatively, the crux of its operating income stems from the cloud infrastructure services platform, Amazon Web Services (AWS), which commanded almost a third of global cloud infrastructure service expenditure in the third quarter of 2023. As long as AWS maintains a double-digit growth trajectory, Amazon’s cash flow is poised to ascend significantly. Despite the stratospheric ascent in its share price, Amazon continues to be reasonably priced relative to its cash flow. This is primarily owing to its practice of reinvesting the majority of its operating cash flow back into the business. After lingering within the range of 23 to 37 times its cash flow throughout the 2010s, Amazon shares present an enticing proposition at slightly over 12 times the projected cash flow in 2025.

The Vanishing Mirage of Meta Platforms

As for Meta Platforms, formerly Facebook, the glitz of its allure has dwindled of late. The Motley Fool Stock Advisor analyst team conspicuously overlooked Meta Platforms in their identification of the top 10 stocks to invest in currently. The void, thus left-inciting curiosity and contemplation, poses a poignant inquiry: should one plunge $1,000 into Meta Platforms at this juncture? These queries are pivotal to ruminating on the enigmatic future trajectory of this once-fabled social media giant.

Randi Zuckerberg, an erstwhile luminary at Facebook and sister of Meta Platforms’ CEO Mark Zuckerberg, is a distinguished member of The Motley Fool’s board of directors. Bearing this in mind, the multifaceted dynamics at play within Meta Platforms are subtly interwoven into the broader tapestry of business and investment landscape.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.