Wealthy Investor Paul Tudor Jones is Unloading Microsoft Stock in Bulk, While Investing in These Top Seven Stocks

Wealthy Investor Paul Tudor Jones is Unloading Microsoft Stock in Bulk, While Investing in These Top Seven Stocks

Billionaire philanthropist Paul Tudor Jones is an iconic figure on Wall Street and has been called “one of the pioneers of the modern hedge fund industry.” He runs Tudor Investment, the hedge fund he founded in 1980.

His greatest claim to fame was predicting Black Monday, the famous stock market crash of 1987. Less than a year after his call, the market plunged more than 22%, marking the worst single-day decline since the stock market crash of 1929. Jones sold the market short, reaping a 200% gain for his hedge fund. So when Jones speaks, Wall Street listens.

The billionaire investor has spoken extensively about the vast potential of artificial intelligence (AI). “I think the introduction of big language models (and) artificial intelligence is going to create a productivity boom that we’ve only seen a few times in the last 75 years,” Jones said.

The ‘Magnificent Seven’ stocks all have AI in their DNA, so it’s no surprise that some of these market leaders are among Tudor’s top holdings. However, it is interesting to note that Jones has just reduced his position in Microsoft (NASDAQ:MSFT), reducing its stake by 56%. Here are the AI-focused Magnificent Seven stocks he bought instead.

Wealthy Investor Paul Tudor Jones is Unloading Microsoft Stock in Bulk, While Investing in These Top Seven Stocks

Image source: Getty Images.

1.Nvidia

No discussion of AI stocks would be complete without Nvidia (NASDAQ:NVDA), so it’s no surprise that Tudor has increased its position in the chipmaker. In the fourth quarter, Tudor Investment increased its stake in Nvidia by 810%, bringing its stake to 132,000 shares worth approximately $121 million (as of Thursday’s market close). This makes Nvidia its third largest holding, with around 1% of the portfolio.

The chipmaker pioneered graphics processing units (GPUs) that became the gold standard for processing AI applications. Nvidia dominates the market both in machine learning – an earlier branch of AI – and in data centers where much of the AI ​​processing takes place, with an estimated 95% market share in each. Nvidia’s long history in AI made it the ideal choice to meet the growing demand for generative AI.

Competitors were already scrambling to develop competing processors, but Nvidia consolidated its lead last week with the release of its Blackwell architecture. Its flagship AI processor, the GB200 Grace Blackwell Superchip, connects two B200 Tensor Core GPUs with a Grace CPU on a single board, acting as a giant CPU. Big tech is already lining up to get their hands on the chips.

During its fourth fiscal quarter 2024 (ended January 28), Nvidia generated record revenue that jumped 265% year over year, while its earnings per share (EPS) soared by 486%, thanks to accelerating demand for its AI processors. Additionally, given the company’s significant spending on research and development (R&D) and its track record of innovation, it will be difficult for competitors to gain ground.

Despite the stock’s recent rise, Nvidia’s price remains reasonable relative to its opportunity. The stock currently sells for 36 times forward earnings, which is a bargain considering its triple-digit growth – a fact that probably hasn’t escaped Jones’ notice.

2. Metaplatforms

Metaplatforms (NASDAQ:META) It might not seem like the most obvious choice in the AI ​​space, but the company has a long history of using AI to achieve its business goals.

In the fourth quarter, Tudor Investment more than doubled its holdings in Meta Platforms, increasing its stake to approximately 102,000 shares worth approximately $52 million (as of Thursday’s market close). This places meta-platforms in the top 15, with around 0.5% of the portfolio.

One of the most intriguing developments of the last year has been Meta’s foray into large language models. The company has developed one of the leading open source AI models – LLaMA (Large Language Model Meta AI) – which is available on all major cloud platforms, providing the company with a completely new revenue stream.

Meta recently announced that it is building an AI system that it says will significantly improve its video recommendations. A test on Reels resulted in “an 8-10% gain in Reels viewing time,” according to Facebook chief Tom Alison, which showed that the new AI model “learns from data much more effectively than the previous generation.

The company also introduced a suite of AI-powered tools to simplify the digital advertising process for advertisers on its platform and help them better reach their target market. This will ultimately strengthen Meta’s fortunes, since the company derives the vast majority of its revenue from digital advertising.

At just 25 times forward earnings, Meta is selling at a discount to S&P500the valuation of 28 – which probably factored into Tudor’s decision.

Smart moves?

While I totally agree with Tudor increasing its stake in Nvidia and Meta Platforms, I have to admit that I am completely perplexed by its decision to halve its stake in Microsoft. The company has several ways to capitalize on the AI ​​revolution.

First, there’s its growing suite of AI-powered co-pilots, which will likely bring in tens, if not hundreds of billions of dollars in additional revenue. Second, Microsoft Azure is stealing market share from its cloud competitors with its AI efforts. In my mind, these factors make Microsoft a buy, not a sell.

I think Jones made a mistake in reducing his stake in Microsoft, but only time will tell.

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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Danny Vena holds positions in metaplatforms, Microsoft and Nvidia. The Motley Fool holds positions and recommends meta-platforms, Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Billionaire Paul Tudor Jones sells Microsoft shares in one fell swoop but buys these ‘magnificent seven’ stocks was originally published by The Motley Fool

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