The billionaire chief of Duquesne Family Office sent two hot AI stocks to the chopping block in favour of another well-known company.
Less than three weeks later, the most significant data release of the first quarter occurred – and you may have missed it. Amid a surge in revenue reports and releases of economic data, February 14th marked the deadline for institutional investors with at least $100 million in assets under management (AUM) to file Form 13F with the Securities and Exchange Commission.
The 13th floor will provide investors with an over-shoulder look of the stocks bought and sold by Wall Street’s top money manager. These snapshots can be specifically communicated regarding the next big trends, such as artificial intelligence (AI).
Image source: Getty Images.
The 100 millionaire asset manager who is unashamed about buying and dumping AI stocks is Stanley Druckenmiller of Duquesne Family Office. The Druckenmiller’s Fund closed in 2024, with over $3.7 billion in AUMs spreading to 78 holdings. It is also an active fund, with an average holding time of less than seven months across all 78 positions.
This sales trend was readily apparent last year. (NVDA) 1.69%)) and Palantir Technologies (pltr 1.18%)) On the chopping block. But while the Duquesne Family Office chief had dumped these hyphlias, he was building stocks into what would become his new favorite artificial intelligence stock.
Druckenmiller bids Adieu to Nvidia and cuts stocks in Palantir’s Duquesne in particular
As June 2023 approached the end, Goliath Nvidia, the Graphic Processing Unit of Drucken Miller, peaked at 9,500,750 shares. This “split adjustment” aspect relates to NVIDIA completing its historic 10-1 forward split in June 2024 with a 12-month stretch that ends on June 30, 2024.
Meanwhile, Druckenmiller’s Fund held 769,965 stakes in Palantir at the end of March 2024. As of December 31, 95% of the position was sold as there were only 41,710 shares remaining.
Although both companies are industry leaders with well-defined competitive advantages, there are several catalysts that explain this aggressive sales activity.
The first and most obvious is that Druckenmiller is simply cashing out his tips. Both Nvidia and Palantir are rising in value, while Duquesne is a relatively active hedge fund. The concern is that Druckenmiller was a seller for more than just benign reasons.
Druckenmiller’s actions may also reflect concerns about AI bubble brewing. Since the internet’s 30 years advent, there has been no next Big innovation that shunned the bubble bursting event. All new technologies and innovations need plenty of time to mature. We are not at the point where companies are properly handling how to optimize their AI solutions or generate positive returns on AI investments.
In a May 2024 CNBC interview, Druckenmiller compared the early days of the Internet to the current AI revolution. Specifically, he pointed out that the internet was bigger than those who thought it was in 1999, 20 years later, but it took a while for this technology to evolve. “AI may be a bit overdue now, but it hasn’t been extended in the long run,” Druckenmiller said.
Another issue with Nvidia and Palantir is historically expensive valuations. Nvidia scaled at a price and sales (P/S) ratio of 42 last summer, but Palantir’s recent lens up to $125 per share has peaked the P/S ratio at 99!
Companies at the cutting edge of Dot-Com’s bubble peaked in P/S ratios ranging from 30-40, losing 80% to 90% of their value. While it is unlikely that Nvidia and Palantir will suffer this great loss, the historical text is on the wall, and valuation premiums of this magnitude cannot be said to be guaranteed or sustainable.
Image source: Amazon.
Billionaire Stanley Druckenmiller has a new favorite AI stock
Duquesne’s CEO is busy cutting down the fund’s stocks in Nvidia and Palantir, but he’s piling up on his new favorite artificial intelligence stock. (amzn -0.59%)). Duquesne Family Office’s latest 13th floor shows that 328,400 shares of Amazon were purchased in the quarter that ended in December, representing the fund’s market value and the 11th largest holding by the top AI stock.
Most people are familiar with Amazon by visiting the world’s leading online marketplaces. Emarketer estimates that Amazon is expected to account for 40.9% of US online retail sales this year.
E-commerce accounts for a significant portion of Amazon’s net sales, a moderately low marginal operation segment that plays a significant role in cash flow generation and net profit. Segments that tick Amazon – and perhaps Stanley Druckenmiller is likely encouraging them to become buyers – are Amazon Web Services (AWS).
AWS is the world’s top cloud infrastructure service provider based on Canalys estimates, gaining a 33% share of cloud service spending in the fourth quarter. Companies are still very early in the cloud spending ramp, and should encourage businesses to increase their spending by incorporating AI solutions including AW into AWS.
As of the end of 2024, AWS had increased its annual occupancy revenue by over $115 billion, with growth rates reaching nearly 20% on a constant currency basis. Last year, AWS accounted for less than 17% of the company’s net sales, but was responsible for 58% of Amazon’s operating profit. With the juicy margins associated with AWS, Amazon’s cash flow growth can help with sales growth in the near future.
Druckenmiller may also be looking beyond AWS. For example, Amazon has won exclusive rights to stream football on Thursday night, along with a package of NBA games. As content libraries grow as they include sporting events, they need power for subscriptions (i.e. primes) and advertising prices. Amazon’s subscription and advertising services segments each maintain a constant double-digit currency growth rate.
The final lure from Stanley Druckenmiller may be an Amazon rating. Although it is not cheap by traditional basic standards, the fast flow multiples from the company’s prices are historically inexpensive. Throughout the 2010s, investors regularly purchased Amazon stocks for a median cash flow of 30 times the end of the year. Stocks are currently available for purchase in 2026 with forecast cash flow of less than 13 times.
