Billionaire investors are selling it and buying these two artificial intelligence (AI) stocks instead

One thing that hasn’t changed on Wall Street over the past 30 years is that there’s always the next big trend or innovation that captures the attention of both professional and casual investors.

At the moment, no trend has captured the attention and pockets of investors more than artificial intelligence (AI).

When I discuss “AI” I’m talking about the use of software and systems to handle tasks normally managed by humans. However, the real value of AI comes from incorporating machine learning. This allows AI software and systems to evolve over time and become more efficient at their tasks.

Last year, PwC researchers published a report (PwC Global Artificial Intelligence Research: Harnessing the AI ​​Revolution) suggesting that AI will add $15.7 trillion to the global economy by the turn of the decade. Did. This includes $6.6 trillion in productivity gains and $9.1 trillion in consumption side effects.

AI’s sector- and industry-wide appeal is not lost on Wall Street’s smartest and most successful asset managers. Billionaire investors at many of the hottest investment funds are strategically moving money in and out of specific artificial intelligence stocks.

Most notably, billionaires continue to aggressively short the semiconductor stocks that are the face of the AI ​​movement. Nvidia (NASDAQ:NVDA) — while piling into two other AI stocks.

Billionaire money managers are cornering Nvidia

After the end of each quarter, institutional investors with at least $100 million in assets under management must file a Form 13F with the Securities and Exchange Commission. These 13Fs provide investors with a detailed snapshot of what top asset managers are buying and selling. Based on the latest round of 13F filings, eight prominent billionaires are putting his Nvidia at a disadvantage. Includes the following (total number of shares sold in parentheses):

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• Israel Englander of Millennium Management (1,689,322 shares)

• Jeff Yass of Susquehanna International (1,170,611 shares)

• Steven Cohen of Point72 Asset Management (1,088,821 shares)

• David Tepper of Appaloosa Management (235,000 shares)

• Philippe Lafont of Coatue Management (218,839 shares)

• Chase Coleman of Tiger Global Management (142,900 shares)

• David Siegel and John Overdeck of Two Sigma Investments (30,663 shares)

Nvidia has become what I regularly refer to as the “infrastructure backbone” of the AI ​​movement. The company’s A100 and H100 graphics processing units (GPUs) are a staple of high-computing data centers. So far, demand has easily outstripped supply of his Nvidia chips, and as a result, substandard pricing power is driving up the company’s data center sales.

But there’s also plenty of reason to believe that NVIDIA’s best days have come and gone. In addition to intensifying external competition from intel and Advanced Micro DevicesNvidia could face significant internal competition for AI chips from its top customers. microsoft, meta platform, Amazon (NASDAQ:AMZN)and alphabetwhich collectively account for about 40% of Nvidia’s revenue, but all four companies are developing their own high-performance AI chips.

Billionaires may also be turned off by the regulatory headwinds NVIDIA faces. The first round of export restrictions to China, the world’s second-largest economy by gross domestic product (GDP), prompted Nvidia to develop toned-down A800 and H800 chips. But U.S. regulators eventually restricted exports of these chips to China as well. China is a key market for her Nvidia, and these regulations threaten to reduce sales by billions of dollars each quarter.

Ratings don’t mean much either. Nvidia is Amazon and Cisco Systems Based on sales over the past 12 months, it peaked during the dot-com bubble. I’ve never seen a market-leading company trade at such a premium to sales for an extended period of time. It’s not that surprising that the billionaire is selling his Nvidia stock.

No. 1 Artificial Intelligence Stock Billionaire Investor Is Buying Instead of NVIDIA: Baidu

The first AI stock whose billionaire money manager completely forgot about Nvidia in the quarter ending in December is based in China Baidu (NASDAQ:BIDU). Not all billionaire investors invest their fund’s money in Chinese stocks, but during the fourth quarter he said eight billionaires bought Baidu (allegedly three times faster). Masu).

• Jeff Yass of Susquehanna International (290,154 shares)

• Israel Englander of Millennium Management (147,481 shares)

• Steven Cohen of Point72 Asset Management (135,600 shares)

• Ken Griffin of Citadel Advisors (80,815 shares)

• Jim Simmons of Renaissance Technologies (47,000 shares)

• David Siegel and John Overdeck of Two Sigma Investments (38,966 shares)

• Philippe Lafont of Coatue Management (5,545 shares)

Baidu’s use of AI can be seen in two of the fastest growing areas: cloud and intelligent driving. The company’s AI Cloud allows merchants to use generative AI solutions to tailor ads to individual customers. Meanwhile, Apollo Go is the world’s most successful self-driving ride-hailing service, with more than 5 million rides on public roads since its launch. AI-powered ventures frequently support Baidu’s double-digit growth in non-online marketing divisions.

Billionaire investors may value Baidu highly in relation to Nvidia because the company’s underlying business units are likely to protect it from crashing even if the AI ​​bubble bursts. Baidu’s Internet search segment has accounted for 85% of the China-based Internet search share from 60% in the past nine years. Baidu’s clearly dominant search engine in China should give it strong ad pricing power in most economic situations.

Billionaires are also likely attracted to Baidu’s meager valuation. Even accounting for the regulatory risks associated with investing in China-based companies, Baidu is valued at just eight times prior-year earnings and less than twice trailing 12-month sales. This is a far cry from the huge valuation that Wall Street has assigned to NVIDIA, and likely sets a safe floor for Baidu’s stock price.

Artificial Intelligence Stock No. 2 Billionaire Investor Is Buying Instead of NVIDIA: Amazon

Another AI stock that made billionaires forget about Nvidia is none other than Amazon, a component of the “Magnificent Seven.” During the quarter ending December, eight successful billionaire investors invested in Amazon stock one after the other. This includes the following people (the total number of purchased shares is in parentheses).

• Ken Griffin of Citadel Advisors (4,321,477 shares)

• Jim Simmons of Renaissance Technologies (4,296,466 shares)

• Chase Coleman of Tiger Global Management (947,440 shares)

• Ken Fisher of Fisher Asset Management (888,369 shares)

• David Siegel and John Overdeck of Two Sigma Investments (726,854 shares)

• Steven Cohen of Point72 Asset Management (462,179 shares)

• Israel Englander of Millennium Management (85,532 shares)

Amazon is incorporating AI solutions into its operations here in countless ways. Some of the more interesting applications include leveraging generative AI solutions within the cloud infrastructure services platform Amazon Web Services (AWS) to help merchants personalize ads for consumers; One example is improving the quality of product listings for sellers.

Most people are familiar with Amazon, the market-leading e-commerce platform, but because it is a low-margin segment, online retail sales contribute little to operating cash flow or profits. Most of the cash flow that Amazon generates can be traced back to ancillary businesses such as AWS, subscription services, and advertising services.

AWS is a key cog in increasing Amazon’s cash flow. Enterprise cloud spending is still in the early stages of growth, which suggests that AWS can maintain the top share of global cloud infrastructure service spending. AWS accounted for two-thirds of Amazon’s operating profit last year, even though it only accounts for one-sixth of Amazon’s net sales.

Compared to Nvidia, Amazon is historically cheaper. The stock is currently valued at less than 13 times consensus cash flow per share in 2025, representing a 44% discount to Amazon’s average multiple to cash flow over the past five years.

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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Sean Williams has held positions at Alphabet, Amazon, Baidu, Intel, and Metahis platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Baidu, Cisco Systems, Meta Platforms, Microsoft, and his Nvidia. The Motley Fool recommends Intel and recommends the following options: Long January 2023 $57.50 call on Intel, Long January 2025 $45 call on Intel, Long January 2026 $395 call on Microsoft, Short January 2026 $405 call on Microsoft. call, and a May 2024 $47 short call. Intel. The Motley Fool has a disclosure policy.

Forget Nvidia: Billionaire investors are selling it and buying these 2 artificial intelligence (AI) stocks instead Originally published by The Motley Fool