For investors, the release of the quarterly Form 13F by the Securities and Exchange Commission (SEC) is like Christmas all over again.
13F provides investors with a detailed snapshot of what stocks Wall Street’s top money managers bought and sold during the most recent quarter (Q4 in this example). In other words, you can get an inside look at what stocks, industries, and trends the best asset managers are interested in.
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Perhaps nothing is more intriguing right now than learning what Wall Street’s top money managers are doing with artificial intelligence (AI) stocks. A report released last year by PwC found that AI, which uses software and systems to handle tasks typically supervised by humans, could add an estimated $15.7 trillion to global gross domestic product by 2030. It is said that there is.
Based on the latest 13F filings, billionaire investors are keen to reduce their holdings in two super-popular AI stocks and buy shares in another brand-name AI-inspired company. I couldn’t stop.
#1 Widely Owned AI Stock That Billionaires Are Decidingly Selling: Nvidia
The artificial intelligence stocks that prominent billionaire investors are putting their money into first are nothing less than the infrastructure of the AI movement. Nvidia (NVDA -1.68%). Eight billionaires reduced their respective stakes in funds in the semiconductor giant during the quarter ended December. This includes the following (total number of shares sold in parentheses):
- Millennium Management’s Israel Englander (1,689,322 shares);
- Jeff Yass of Susquehanna International (1,170,611 shares).
- Stephen Cohen of Point72 Asset Management (1,088,821 shares).
- David Tepper of Appaloosa Management (235,000 shares).
- Philippe Laffond 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);
If you’re wondering why these top investors are cutting back on Wall Street’s most popular mega-cap stocks, increased competition and margin cannibalization may be the answer.
For now, Nvidia’s A100 and H100 graphics processing units (GPUs) dominate AI-powered data centers.analyst of citygroup It’s estimated that Nvidia’s chips could account for a 90% share of GPUs deployed in high-computing data centers this year. However, competition is intensifying. Advanced Micro Devices This year we plan to expand our deployment of MI300X GPUs. intel plans to debut its Gaudi3-generated AI software chip later this year as a direct competitor to the H100.
Internal competition is also a potential problem. microsoft (MSFT -0.72%) and meta platform Nvidia ranks first and second in total spending, respectively. But even though these companies are shelling out big bucks for his Nvidia, they are hard at work developing their own AI chips. Sooner or later, Microsoft and Meta’s dependence on Nvidia should be reduced.
Ironically, NVIDIA’s expansion may also be its undoing, at least when it comes to the company’s gross margins. Most of his Nvidia’s data center growth in fiscal year 2024 (ending in late January) was the result of a shortage of A100 and H100 GPUs. When a product is rare and in high demand, sellers typically have extraordinary pricing power. If Nvidia ramps up production of its high-performance GPUs, it could cannibalize its own superior pricing power.
#2 Widely Owned AI Stock Billionaires Are Decidingly Selling: Microsoft
Another AI stock jettisoned by billionaires is Microsoft, the world’s largest publicly traded company by market capitalization. Despite actively investing in OpenAI (the company that developed the popular chatbot ChatGPT) and developing its own AI chip, his seven genius billionaire investors became sellers during the fourth quarter. I did. This includes the following people (the total number of shares sold is in parentheses).
- Ole Andreas Halvorsen of Viking Global Investors (3,024,399 shares).
- Stephen Cohen of Point72 Asset Management (1,569,462 shares).
- Jim Simmons 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 have completely sold their funds’ stakes in the world’s largest publicly traded companies. The reasons behind these sales may boil down to a combination of history and valuation.
Over the past 30 years, there has been no shortage of the next big investment trends. While some of these trends have made long-term investors significantly richer (such as the advent of the internet and cloud computing), the next big investments have all outgrown the initial bubble. In other words, investors consistently overvalue early adopters of new innovations and technologies, and AI appears to be no exception.
Microsoft’s reputation is another potential sticking point. Investors will now pay 31 times prior year earnings, a far cry from the year-end multiples of 16 to 25 times prior year earnings that investors paid from 2014 to 2018.
It’s Microsoft’s incredible cash flow that could make these billionaires ultimately regret their decision to sell. The perfect blend of high-margin cash flows from traditional divisions (such as Windows and Office) and high-growth initiatives like Azure, the cloud services infrastructure platform, has given Microsoft an edge on the acquisition and innovation fronts. You have the luxury of seizing opportunities.
Image source: Getty Images.
Billionaires can’t stop buying artificial intelligence stocks: Amazon
However, the billionaire wealth manager did not prohibit trading in all artificial intelligence stocks during the quarter ended December.e-commerce company Amazon (AMZN -0.69%)leverages generative AI in a variety of ways to enhance voice interactions with Alexa and help sellers create more engaging and tailored ads. It was a popular stock for eight billionaires. (The total number of purchased shares is in parentheses):
- Ken Griffin of Citadel Advisors (4,321,477 shares).
- Jim Simmons of Renaissance Technologies (4,296,466 shares).
- Chase Coleman of Tiger Global Management (947,440 shares).
- Ken Fisher of Fisher Asset Management (888,369 shares).
- John Overdeck and David Siegel of Two Sigma Investments (726,854 shares);
- Stephen Cohen of Point72 Asset Management (462,179 shares).
- Millennium Management’s Israel Englander (85,532 shares);
While AI contributes to the appeal of Amazon’s range of products and services, the company’s three ancillary divisions are growing rapidly and are most likely driving a wave of billionaires.
Most consumers are probably familiar with Amazon, as it has the most dominant online marketplace in the United States. Although this segment generates a lot of revenue, margins on online retail sales are low. Most of Amazon’s cash flow can be traced back to its cloud infrastructure services division, Amazon Web Services (AWS), as well as its subscription and advertising services.
AWS is Amazon’s superstar. The company is a leading provider of cloud infrastructure services globally, with annual run-rate sales approaching his $97 billion. Not only is enterprise spending on cloud infrastructure services still in its infancy, but the margins associated with cloud services dwarf those of e-commerce. It’s not uncommon for AWS to account for more than half of Amazon’s operating profits.
Another driver for billionaires to hit the buy button on Amazon stock in the fourth quarter could be its valuation. Traditional price-to-earnings ratios tend to move value investors in the opposite direction, but Amazon is historically cheap relative to its cash flow.
Cash flow tends to be a more prudent way to value Amazon, as Amazon tends to reinvest most of its operating cash flow into its logistics business and various high-growth initiatives. Investors who spent the entire 2010s trading for the equivalent of 23 to 37 times year-end cash flow can now buy stocks at about 12 times consensus 2025 cash flow estimates.
Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. She is an advertising partner of Citigroup and the Motley Fool’s Ascent. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Sean Williams has held positions at 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 Call on Intel, Long January 2025 $45 Call on Intel, Long January 2026 $395 Call on Microsoft, Short February 2024 $47 Call on Intel Call, Intel’s January 2026 $405 short call. Microsoft. The Motley Fool has a disclosure policy.
