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Stan Druckenmiller ran a highly successful hedge fund from 1981 to 2010. He never had a loss in his year and was making an average profit of 30% per year for his clients. Few Wall Street asset managers have a track record like this, making Druckenmiller an excellent case study for investors.
He currently manages a multi-billion dollar fortune through the Duquesne family office. As of the quarter ended December, Druckenmiller had 21.1% of his portfolio invested in two Magnificent Seven stocks. Nvidia (NASDAQ:NVDA) Accounting for 9.1%, microsoft (NASDAQ: MSFT) It accounted for 12% of his investment assets. The size of these positions is a clear sign of high conviction.
Are Nvidia and Microsoft still worth investing in?
1. Nvidia
Nvidia reported stunning financial results in the fourth quarter, smashing revenue and bottom-line estimates. Data Center and Professional Visualization segment sales posted triple-digit growth for him, with total revenue increasing 265% to $22.1 billion. Meanwhile, non-GAAP net income soared 486% to $5.16 per diluted share. That’s because gross margins expanded by more than 10 points due to pricing power and an expanded software business that brings even higher margins than his Nvidia hardware.
The company is best known for its graphics processing units (GPUs), the gold standard for processing complex data center workloads such as computer graphics and artificial intelligence (AI). In fact, Nvidia holds more than 95% market share in workstation graphics and more than 80% in AI chips.
But the company is truly formidable as it expands into the adjacent data center market with high-performance networking equipment, central processing units (CPUs), subscription software, and cloud services, all built specifically for AI.
CEO Jensen Huang highlighted the strategy at the company’s recent annual GPU Technology Conference (GTC). “Nvidia doesn’t make chips. Nvidia builds data centers,” Huang said. He further said, “NVIDIA’s opportunity is not a GPU opportunity. A lot of people are making GPUs. We are pursuing the data center market.”
This strategy not only creates monetization potential beyond GPUs, but also reduces friction with customers. As Huang explained, Nvidia essentially sells off-the-shelf data centers purpose-built to power AI workloads.
With this in mind, Nvidia values its addressable market at $1 trillion, and Wall Street expects the company to grow its earnings per share by 35% annually over the next five years. While this consensus estimate is impressive, his current valuation of 77x P/E still looks quite expensive.
Personally, I would wait for a cheaper entry point before buying NVIDIA stock. I say this as a current shareholder.
2.Microsoft
The tech giant reported strong financial results in the second quarter, beating expectations on revenue and bottom line. Revenue rose 18% to $62 billion, driven by strong growth in sales of commercial software and cloud computing services. Meanwhile, disciplined expense management resulted in non-GAAP net income increasing 26% to $2.93 per diluted share. Management is targeting third-quarter revenue growth of 14% to 15%, and as the company leans into its AI, investors can expect similar results in the future.
Microsoft dominates the software-as-a-service market due to its success with office productivity (Microsoft 365), enterprise resource management (Dynamics 365), and cybersecurity products. The company introduced Generative AI Copilot to automate tasks across these software categories. For example, with Microsoft 365 Copilot, you can draft text in Word, create presentations in PowerPoint, and analyze data in Excel. Management expects these generative AI co-pilots to contribute even more to revenue in the future.
Meanwhile, Microsoft is also gaining market share with cloud computing. His Azure division of the company accounted for 24% of his cloud infrastructure and platform services spending in the fourth quarter, up nearly 2% year over year. CEO Satyanadera attributes these stock gains to his AI investments, particularly his partnership with OpenAI. Specifically, Microsoft is the exclusive cloud provider for his OpenAI and Azure customers are the cognitive engines behind ChatGPT Plus. He uses his OpenAI’s large-scale language models like GPT-4. You can use it to build custom generative AI applications.
Going forward, the Software-as-a-Service market is expected to grow at an annual rate of 13.7%, and the cloud computing market is also expected to expand at an annual rate of 14.1% over the same period. This gives Microsoft a chance to achieve annual sales growth from the early part of his decade to the end of his decade. Investors can expect some accelerated growth in earnings from share buybacks and a continued focus on cost control.
In fact, Wall Street expects Microsoft to increase its earnings per share by 16% annually over the next five years. However, based on this consensus estimate, the current valuation, with a P/E ratio of nearly 39 times, looks quite expensive. Microsoft is a good company with growth potential, but I would be surprised if the Magnificent Seven stock outperforms the market over the next five years at its current price.
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Trevor Jennewine holds a position at Nvidia. The Motley Fool has a position in Microsoft and He recommends Nvidia. The Motley Fool recommends the following options: His January 2026 $395 long call on Microsoft and his January 2026 $405 short call on Microsoft. The Motley Fool has a disclosure policy.
Billionaire Stan Druckenmiller has 21% of his portfolio invested in two “Magnificent Seven” stocks.
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