Are you already a successful tech stock investor, managing billions of dollars for yourself and others? If not, you may be interested in investing in artificial intelligence (AI) stocks. There are probably some things you can learn from people.
Gaining insight from the behavior of the world’s most successful investors is probably easier than you think. The Securities and Exchange Commission requires nearly everyone managing $100 million or more in assets to disclose recent trading activity every three months.
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The latest quarterly disclosures have just been released, and you might be surprised at which AI stocks billionaires are selling and which ones they’re buying.
A surprising AI stock sold by a billionaire: Nvidia
In the last three months of 2023, at least three reputable hedge funds each sold more than 1 million shares. Nvidia (NVDA -4.35%). Millennium Management’s Israel Englander, Susquehanna International’s Jeff Yass and Point72 Asset Management’s Stephen Cohen have significantly reduced their long positions among chip designers.
These billionaires haven’t completely removed Nvidia stock from their portfolios, but for all three, it’s a relatively small bet. As of the end of December, Point72 had his largest position in Nvidia, representing his 0.64% of the total portfolio.
Nvidia isn’t the only company designing chips that can run accelerated applications. However, new competing chips are being designed, which could make the product significantly more expensive. Advanced Micro Devices and Amazon Don’t run Nvidia’s proprietary CUDA platform.
Large switching costs could give Nvidia pricing power for years to come. Investors confident that the AI revolution will continue to drive growth have pushed the stock up to 96 times its recent price-to-earnings ratio.
Unfortunately, semiconductor sales are highly cyclical, and when they do fall, they tend to fall quickly. Hedge fund managers are selling the stock, up 240% of its gain over the past year, in anticipation of disappointing guidance from management when it releases quarterly results after the market closes on Wednesday. Because they know that much of their profits can disappear quickly.
AI stocks that billionaires keep buying: Alphabet
Millennium Management has significantly increased sales. alphabet (Google 0.43%) (GOOG 0.31%) The company acquired 2.4 million Class A shares of the company in the fourth quarter. It wasn’t alone. Susquehanna International purchased approximately 780,000 Class A shares, which have voting rights and trade at a slightly higher price than Class C shares.
James Simmons and Renaissance Technologies also joined Google’s parent company. During the fourth quarter, Renaissance purchased 1.8 million Class A shares and 1.4 million Class C shares.
Why billionaire fund managers are attracted to Alphabet
Alphabet was surprised when OpenAI surprised the world with the release of ChatGPT in late 2022. Alphabet’s own chatbot (previously known as Bard) was a total disappointment by comparison. But what many investors don’t realize is that Alphabet has been an AI-first company for years, even before anyone heard about ChatGPT.
Alphabet rebranded Bard to Gemini. Gemini could be as valuable to his OpenAI and its partners as his ChatGPT, as it allows for more comprehensive large-scale language models. microsoft. However, the billionaire is not betting on an alphabet based on Gemini. They like this stock because even if Gemini flops, it can still deliver market-beating returns over time.
Google’s core products, including Search, Android, Chrome, Maps, Gmail, and YouTube, have each had more than 1 billion monthly active users in recent years. Search, the company’s oldest and perhaps most valuable product, still dominates its field with a 91.5% market share.
Microsoft, the world’s largest company by market capitalization, has been investing resources in the Bing search engine since 2009. Even with ChatGPT’s help, the company’s share of the global search market in January was just 3.4%.
Is it a good time to follow billionaires?
Fund managers will be the first to tell retail investors that not every stock they pick will be a winner. Buying into stocks just because you’re a billionaire can have dire consequences for your portfolio, but adding Alphabet stock to your diversified portfolio seems like a smart move right now.
At recent prices, Alphabet’s Class A shares can be purchased for approximately 20.9 times forward earnings. That’s a reasonable price to pay for a company that has grown its earnings per share by 191% over the past five years. Even if revenues grow half as fast as before, patient investors could still realize market-beating returns.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Cory Renauer has a position at his Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends the following options: His long January 2026 $395 call on Microsoft and his short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
