Billionaires Are Selling Nvidia Stock and Buying These 2 Artificial Intelligence (AI) Stocks Instead

Billionaires Are Selling Nvidia Stock and Buying These 2 Artificial Intelligence (AI) Stocks Instead

So far, Nvidia has been one of the biggest winners of the artificial intelligence (AI) boom. Shares have surged 173% over the past year as the company reported unprecedented demand for its graphics processing units, or GPUs, chips that power all of the most advanced AI systems.

However, a billionaire hedge fund managers reduced their positions in Nvidia during the first quarter, while purchasing shares of two other AI stocks: Amazon (NASDAQ:AMZN) And Selling power (NYSE:CRM).

  • Israel Englander of Millennium Management sold 720,004 shares of Nvidia stock, reducing his stake by 35%. At the same time, he increased his positions in Amazon and Salesforce by 32% and 36% respectively. These stocks rank among its largest and 12th largest holdings, respectively, excluding options.

  • Louis Bacon of Moore Capital Management sold 2,006 shares of Nvidia, reducing his stake by 19%. He also increased his stake in Amazon by 18% and opened a new position in Salesforce. These stocks rank among its largest and sixth largest holdings, respectively, excluding options.

  • Philippe Laffont of Coatue Management sold 2,937,060 Nvidia shares, reducing his stake by 68%. At the same time, he increased his position in Amazon by 3% and doubled his stake in Salesforce. These stocks rank second and fourth among his holdings, respectively.

Investors should not interpret these transactions to mean that Nvidia is a bad investment. All three hedge fund managers still hold a stake in the chipmaker. But Amazon and Salesforce deserve deeper consideration. Here are the important details.

1. Amazon

Amazon operates the largest online marketplace in North America and Western Europe by gross merchandise sales, and retail strength has allowed the company to develop a booming digital advertising business. Amazon is the largest retail media company in the United States and the third largest advertising technology company global. Meanwhile, Amazon Web Services (AWS) leads the market in cloud infrastructure and platform services revenue.

Amazon uses artificial intelligence (AI) to create monetization opportunities and improve the efficiency of its various businesses. In e-commerce, the company recently announced a generative shopping assistant called Rufus, which will help consumers find and compare products. Amazon also launched a generative AI assistant for sellers that streamlines the creation of product pages. Finally, the company uses AI in its logistics business to manage inventory and optimize delivery routes.

In advertising, Amazon uses machine learning to ensure consumers see the most relevant ads. This ultimately results in more successful campaigns for marketers, making Amazon an even more attractive advertising partner. The company also launched a generative AI tool that allows brands to transform product profile photos into lifestyle images.

In cloud computing, AWS is already well-positioned to benefit from AI given its leadership in cloud infrastructure and platform services, but the company has also launched new products. Amazon Bedrock is a cloud service that allows brands to customize large pre-trained language models and create generative AI applications. Amazon Q is a conversational assistant that can summarize information and automate tasks like coding.

Wall Street analysts expect Amazon to grow its earnings per share by 24% annually over the next three to five years. This consensus estimate makes its current valuation of 50 times earnings relatively reasonable. Indeed, Amazon is trading near its lowest earnings multiple in two years. I would feel comfortable buying this AI stock today, and I think patient investors should consider doing the same.

2. Sales force

Salesforce is the market leader in customer relationship management (CRM) software, and its market share exceeds that of the next four competitors combined. Its platform brings together productivity applications for sales, customer service, marketing and commerce. Salesforce will undoubtedly benefit from increased core CRM spending, but two new products expand its opportunities into the adjacent areas of data management and automation.

First, Data Cloud unifies customer data from internal sources (Salesforce CRM software) and external sources (third-party data platforms), and allows users to activate this data to automate workflows, personalize the customer experience and develop AI applications. Salesforce CEO Marc Benioff says Data Cloud is the fastest-growing product in the company’s history.

Second, Einstein Copilot is a natural language interface that leverages generative AI to automate tasks on the CRM platform. For example, Einstein can summarize information and surface relevant insights for sales and customer service teams. It can also help sales teams develop digital storefronts and marketing teams create advertising campaigns.

CRM spending is expected to grow 13.9% annually through 2030, according to Grand View Research. Salesforce should benefit from this tailwind in any case, but mainly because Data Cloud and Einstein Copilot add value to pre-existing products and create cross-selling opportunities for the company. Indeed, Benioff said he believes “Data Cloud will become the heart and soul” of the Salesforce CRM platform as companies invest in AI, simply because AI must be rooted in good data to be effective.

Wall Street analysts expect Salesforce to grow its earnings per share by 21% annually over the next three to five years. This makes its current valuation of 64.8 times earnings look quite expensive. Sure, Salesforce could grow earnings faster than analysts expect, but I would wait for a cheaper valuation multiple before buying this stock.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Trevor Jennevine has positions at Amazon and Nvidia. The Motley Fool ranks and recommends Amazon, Nvidia, and Salesforce. The Motley Fool has a disclosure policy.

Billionaires are Selling Nvidia Stock and Buying These 2 Artificial Intelligence (AI) Stocks Instead was originally published by The Motley Fool

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