It’s no secret that artificial intelligence (AI) is the hottest play for investors. Much of the stock market’s big gains in 2023 and 2024 are due to growing interest in all things AI.
No company has been more at the forefront of the AI boom than Nvidia (NASDAQ:NVDA). The chipmaker’s stock price soared 239% last year and is up nearly 75% this year. But is the enthusiasm around Nvidia starting to fade? Maybe. Two billionaire investors sell Nvidia and buy another AI stock instead.
Kudos to Nvidia
David Tepper is known to many as the owner of the Carolina Panthers. However, he amassed enough money to purchase the NFL franchise by achieving huge success with the hedge fund In 1993, he founded Appaloosa Management. Today, Tepper’s net worth stands at $20.6 billion.
Tepper is optimistic about AI. Eight of the top 10 holdings in Appaloosa’s portfolio are AI stocks. Nvidia ranks fourth among hedge funds, but Tepper seems to think the stock’s tremendous momentum may be coming to an end. In the fourth quarter of 2023, it sold nearly 23% of Appaloosa’s stake in the graphics processing unit (GPU) maker.
He’s not the only billionaire investor now visibly less enthusiastic about Nvidia. Chase Coleman first made his mark in the world of investing working with legendary hedge fund manager Julian Robertson. Coleman went on to run his own hedge fund, Tiger Global Management, which later expanded into venture capital. He is now worth $5.7 billion.
Tiger Global Management reduced its position in Nvidia in the fourth quarter by almost 13%. Nvidia still claims 10th place in the hedge fund’s portfolio with a stake valued at around $480 million at the end of 2023. However, Coleman is taking some of his profits out of the stock after making big gains.
Kudos to Amazon
Tepper and Coleman saw Amazon (NASDAQ:AMZN) as a best AI stock to buy in the fourth quarter. Tepper’s Appaloosa fund increased its position in the e-commerce and cloud services giant by more than 5%. Coleman’s Tiger Global Management increased its stake in Amazon by 24%.
Why are these two billionaire investors more bullish on Amazon than Nvidia? I suspect that Tepper and Coleman might think that Nvidia’s valuation is now at a level where any sign of trouble could cause a sharp sell-off. At the same time, Amazon appears to be creating lasting momentum.
AI is undoubtedly a key growth driver for Amazon. The company’s cloud platform, Amazon Web Services (AWS), is the leading cloud service provider in terms of market share. AWS is particularly investing heavily in supporting the development of generative AI.
Amazon also uses generative AI internally. CEO Andy Jassy said during the company’s fourth-quarter earnings conference call: “(We) believe (generative AI) will ultimately generate tens of billions of dollars in revenue for Amazon over the next few years. years.”
Of course, Amazon isn’t just an AI stock. The company’s efforts to increase the profitability of its e-commerce business continue to bear fruit. Amazon has recorded seven consecutive quarters of improving operating margins in its North America business segment.
It has also become a key player in the digital advertising market. Amazon’s advertising revenue soared 26% year-over-year in the fourth quarter. And that growth came before the company launched its ads on Prime Video.
Buying new Amazon stock has already paid off for Tepper and Coleman. The stock is up more than 20% since the start of the year.
Should you also buy Amazon?
Investors shouldn’t sell Nvidia and buy Amazon just because two hedge fund billionaires did it. However, it’s not a bad idea to examine the potential reasons behind Tepper and Coleman’s decisions.
I think the reasons Tepper and Coleman added more Amazon stock in the fourth quarter still stand. The company’s profits are expected to continue to increase. AI and advertising remain powerful growth drivers. Amazon remains, in my opinion, an excellent long-term choice.
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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. Keith Speights has positions at Amazon. The Motley Fool holds positions and recommends Amazon and Nvidia. The Mad Motley has a disclosure policy.
2 Billionaire Investors are Selling Nvidia and Buying This Artificial Intelligence (AI) Stock Instead was originally published by The Motley Fool
