Billionaires Are Selling Nvidia and Buying This Stock Instead

Billionaires Are Selling Nvidia and Buying This Stock Instead

Nvidia (NASDAQ:NVDA) is the poster child for the artificial intelligence (AI) revolution, but it’s a stock that has been crushing the market for far longer than the current hype suggests.

It has made a dramatic jump over the past year, up more than 200% and surpassing Alphabet And Amazon (NASDAQ:AMZN) to reach the third largest market capitalization in the stock market, at almost $3 trillion.

Is this the end of the road? Certainly not. Nvidia remains the leading producer of chips for generative AI and has many other products that drive progress in the tech industry.

However, some investors think their dollar will perform better right now in other stocks. Several billionaire investors sold Nvidia shares in the first quarter of 2024, including Stanley Druckenmiller of Duquesne, who sold 441,551 shares; Ken Griffin of Citadel Advisors, who sold 2,462,716 shares; Israel Englander of Millennium Management, who sold 720,004 shares; and John Overdeck and David Siegel of Two Sigma, who sold 420,801 shares.

Instead, many billionaire investors are buying another stock with a trillion-dollar market cap: Amazon. Millennium Management’s Englander bought 2,390,755 shares in the first quarter, while Citadel’s Griffin bought 6,577,909 shares. Ken Fisher of Fisher Asset Management bought 785,018 shares, and other billionaires bought shares as well.

Should you buy Amazon stock too?

The generative AI revolution

As with Nvidia, many of Amazon’s opportunities are AI-related. Amazon has become a leader in AI technology and uses it across its business empire.

Above all, there is Amazon Web Services (AWS), its cloud computing activity. Amazon is the world’s leading cloud computing company, with 31% overall market share.

Amazon has developed a competitive set of groundbreaking generative AI services to appeal to every type of business customer. It has three levels, from tools allowing developers to create their own large language models (LLM), through semi-custom solutions with Amazon’s own LLMs and ending with turnkey programs that any layman can use. For example, it recently launched a new service that lets third-party vendors enter a URL to a web page, and the tool automatically creates product descriptions on Amazon. More than 100,000 customers have already used AWS generative AI services.

AWS is gaining momentum and accelerating again after customers began cutting budgets in an inflationary environment. Sales increased 16% year-over-year in the first quarter of 2024 and Amazon signed several deals, as usual, with high-profile customers. AWS is a profit machine; operating profit increased 84% year over year in the first quarter to reach $9.4 billion and accounted for 61% of the total.

CEO Andy Jassy said: “I think there are truly incredible growth opportunities ahead of us. » He explained that 85% of IT (information technology) spending is still not done in the cloud, but that will change and create a tremendous growth opportunity for cloud computing companies.

E-commerce is on the rise

Let’s not forget e-commerce, which is almost synonymous with Amazon. Amazon accounts for 38% of overall U.S. e-commerce sales, with Walmart in second position with only 6%. This is too big a chasm for any competitor to narrow at any time in the near future, and Amazon is constantly improving its processes to maintain or widen the gap.

The company recently restructured its delivery infrastructure into eight regional warehouses instead of a national strategy, and this has already produced excellent results. This allows more packages to be sent to more customers in two days, and because there are fewer miles to travel on average, it costs Amazon less. What’s probably an even bigger benefit is that as customers get more products faster, they rely on Amazon for a greater portion of their daily purchases, leading to greater loyalty that should yield dividends. positive in the long term.

E-commerce is expected to grow at a compound annual growth rate of 9.5% over the next five years, according to Statista. This is true organic growth for Amazon.

What Amazon will do next

Amazon is no slouch when it comes to streaming, which is included with a Prime subscription, although this has been changed to the ad-supported tier. It moved to the two-tier system like its competitors and now charges members more to watch ad-free.

It has a top-tier movie studio since its acquisition of MGM Studios, and the combined efforts of Amazon and MGM are already creating popular, highly-watched content. It also sells its own streaming devices in addition to its line of smart devices.

One of the company’s new flagship activities is advertising. It uses the power of AI to show shoppers the products they’re already buying and brings its advertising prowess to the ad-supported streaming level. Advertising is Amazon’s fastest-growing segment, up 24% year-over-year in the first quarter, and there’s a lot of momentum here.

It’s no surprise that billionaires recognize the opportunity to own Amazon stock, and it’s also a great candidate for retail investors.

Should you invest $1,000 in Amazon right now?

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Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Alphabet, Amazon, Nvidia and Walmart. The Motley Fool has a disclosure policy.

Billionaires are selling Nvidia and buying this stock instead was originally published by The Motley Fool

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