Keeping track of what billionaire hedge fund managers are doing is a great way to get ideas for your portfolio. Usually they have a proven track record, but you need to make sure they are buying shares for reasons similar to yours. Otherwise, you could be stuck with a stock with strong short-term moves but poor long-term prospects.
Bridgewater Associates, led by Ray Dalio, is a giant hedge fund with nearly $175 billion in assets under management. It bought a lot of stocks in the first quarter, but among its biggest purchases were companies related to artificial intelligence (AI). Since AI is such a broad field, looking at what billionaires are buying is a great way to double-check yourself, and you might even come up with a new idea.
Taking a huge gamble on the spread of AI
In the first quarter, Bridgewater Associates increased its positions in the following stocks:
|
Company |
Current percentage of portfolio |
Previous percentage of portfolio |
|---|---|---|
|
Alphabet |
4.1% |
1.6% |
|
Nvidia |
3.2% |
0.7% |
|
Metaplatforms |
2.4% |
1.3% |
|
Microsoft |
1.2% |
0.4% |
|
Amazon |
1% |
0% |
Data source: WhaleWisdom.
That’s a significant increase among many of the biggest AI players, pointing to Ray Dalio’s belief that AI will be a huge growth catalyst for these stocks. So far he’s been right, as these stocks have delivered phenomenal performance in 2024.
However, information about which stocks these billionaires bought isn’t available to the public until 45 days after the end of the first quarter, so we’re now dealing with two-month-old information. So, are these five still worth buying at today’s prices?
These AI stocks are great picks for all investors
Starting with the largest of these positions, Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL)Bridgewater has made it the third-largest investment in its portfolio. This is a change in sentiment, as until a few months ago many believed that Alphabet was losing the AI arms race. While it has stumbled out of the gate, the latest AI releases have been positively received, and its generative AI model, Gemini, is emerging as a top pick in the space.
This has led to a rise in its share price, with Alphabet up almost 20% since the end of the first quarter. Despite the rise, Alphabet remains attractively priced at 23 times forward earnings, making it a strong buy now.
Nvidia (NASDAQ: NVDA), the king of AI hardware, is a much tougher stock to judge. The company recently reported earnings for the first quarter of its fiscal year 2025 (ending April 28) and saw revenue increase by a whopping 262%.
This increase was fueled by the huge demand for graphics processing units (GPUs) used in data centers to train AI models. Nvidia has been one of the best performing stocks in the index for two years in a row, but this enormous growth makes the stock difficult to assess.
Currently, Nvidia trades at 42 times forward earnings, making it quite expensive. However, this premium could be worth it if demand for AI continues for many years. Nvidia is a very difficult stock to rate, and I wouldn’t blame investors for ditching it now.
Metaplatforms (NASDAQ: META) is similar to Alphabet in that most of its revenue comes from advertising. With dominant properties like Facebook and Instagram under its roof, it generates a lot of money from advertisements. However, Meta has also made substantial AI investments in developing its own generative AI models suitable for its use.
It has integrated its AI model into these platforms and can help create content or understand something about a message. While these technologies can be monetized, their primary use at this time is to strengthen Meta’s position as a company with high-quality social media platforms. With forward earnings of 24 times, it’s a great stock to buy.
Microsoft (NASDAQ: MSFT) partners with OpenAI to integrate ChatGPT-powered products into its primary offering. The Copilot is already integrated into the Microsoft Office product suite (if you pay the subscription fee) and provides impressive productivity increases. Microsoft also has a strong cloud computing business in Azure, and this division is experiencing incredible growth as companies scramble to increase their computing power to create their own internal AI models. Although Microsoft is achieving great success as a company, it is a very expensive stock.
At 36 times forward earnings, it’s not far off Nvidia’s valuation, despite much slower growth levels. Because of Microsoft’s price, I’m leaving the shares for now.
Finally there is Amazon (NASDAQ: AMZN), a company that many may not see as an AI investment. While most of Amazon’s revenue comes from its commerce-related businesses, 62% of its operating revenue comes from its cloud computing division, which benefits from the same trends as Microsoft Azure. Amazon Web Services (AWS) holds the majority of the cloud computing market share and is growing revenue at a healthy pace of 17% year over year.
Overall, Amazon is thriving right now, with revenue up 13% and earnings per share up dramatically from $0.31 last year to $0.98. Amazon is another difficult company to value because it is still working to maximize its profitability. Even though the price is about 40 times forward earnings, I think it’s a fair price to pay because Amazon is still doing a lot of margin expansion.
Overall, Ray Dalio and Bridgewater Associates’ investments in the first quarter are a good choice. While investors shouldn’t blindly follow them on these purchases, I think these stocks are a good starting point when looking for top-notch investment ideas.
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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Keithen Drury has positions in Alphabet, Amazon and Meta Platforms. The Motley Fool holds positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Billionaire Ray Dalio Just Bought These 5 Artificial Intelligence (AI) Stocks Originally published by The Motley Fool
