So far, Nvidia is one of the biggest winners of the artificial intelligence (AI) boom. Shares soared 173% last year as the company reported unprecedented demand for its graphics processing units, or GPUs, chips that power all the most advanced AI systems.
However, some billionaire hedge fund managers trimmed their positions in Nvidia during the first quarter, while buying shares of two other AI stocks: Amazon (NASDAQ: AMZN) And Sales team (NYSE: CRM).
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Millennium Management’s Israel Englander sold 720,004 shares of Nvidia, reducing his stake by 35%. Meanwhile, he increased his positions in Amazon and Salesforce by 32% and 36% respectively. These stocks are among his largest and twelfth largest holdings, respectively, excluding options.
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Louis Bacon of Moore Capital Management sold 2,006 shares of Nvidia, reducing his stake by 19%. He also increased his stake in Amazon by 18% and opened a new position in Salesforce. These stocks are among his largest and sixth largest holdings, respectively, excluding options.
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Philippe Laffont of Coatue Management sold 2,937,060 shares of Nvidia, reducing his stake by 68%. Meanwhile, he increased his position in Amazon by 3% and doubled his stake in Salesforce. These stocks are his second and fourth largest holdings, respectively.
Investors should not interpret these transactions as a bad investment by Nvidia. All three hedge fund managers still have a stake in the chipmaker. But Amazon and Salesforce deserve further consideration. Here are the important details.
1. Amazon
Amazon operates the largest online marketplace in North America and Western Europe in terms of gross merchandise sales, and its strength in retail has allowed the company to build a thriving digital advertising business. Amazon is the largest retail media company in the United States and the third largest advertising technology company in the world. Meanwhile, Amazon Web Services (AWS) is the market leader in cloud infrastructure and platform services revenues.
Amazon uses artificial intelligence (AI) to create monetization opportunities and increase efficiency across its various businesses. In e-commerce, it recently announced a generative AI shopping assistant called Rufus that will help consumers find and compare products. Amazon also debuted a generative AI assistant for sellers that streamlines the creation of product pages. Finally, the company uses AI in its logistics operations to manage inventory and optimize delivery routes.
When advertising, Amazon uses machine learning to ensure consumers see the most relevant ads. That ultimately translates into more successful campaigns for marketers, making Amazon an even more attractive advertising partner. The company has also launched a generative AI tool that allows brands to convert product profile photos into lifestyle images.
In cloud computing, AWS is already well positioned to benefit from AI given its leadership in cloud infrastructure and platform services, but the company has also introduced new products. Amazon Bedrock is a cloud service that allows brands to customize pre-trained large language models and build generative AI applications. Amazon Q is a conversational assistant that can summarize information and automate tasks such as coding.
Wall Street analysts expect Amazon to grow earnings per share 24% per year over the next three to five years. That consensus estimate makes the current valuation of 50 times earnings seem relatively reasonable. In fact, Amazon is trading near its cheapest profit level in two years. I would confidently buy this AI stock today, and I think patient investors should consider the same.
2. Salesforce
Salesforce is the market leader in Customer Relationship Management (CRM) software and its market share is greater than that of the next four competitors combined. The platform brings together productivity applications for sales, customer service, marketing and commerce. Salesforce will undoubtedly benefit as core CRM spending grows, but two new products expand its capabilities in the adjacent areas of data management and automation.
First, Data Cloud unifies customer data from internal sources (Salesforce CRM software) and external sources (third-party data platforms), and lets users activate that data to automate workflows, personalize the customer experience, and develop AI applications. Salesforce CEO Marc Benioff says Data Cloud is the fastest growing product in company history.
Second, Einstein Copilot is a natural language interface that relies on generative AI to automate tasks within the CRM platform. For example, Einstein can summarize information and surface relevant insights for sales and customer service teams. It can also help commercial teams develop digital storefronts, and it can help marketing teams create advertising campaigns.
According to Grand View Research, CRM spending is expected to grow 13.9% annually through 2030. In any case, Salesforce should benefit from that tailwind, but especially because Data Cloud and Einstein Copilot add value to already existing products and create cross-sell opportunities for the company. Benioff said he believes “Data Cloud will become the heart and soul” of the Salesforce CRM platform as companies invest in AI, simply because AI must be rooted in good data to be effective.
Wall Street analysts expect Salesforce to grow earnings per share 21% per year over the next three to five years. That makes the current valuation of 64.8 times earnings seem quite pricey. Sure, Salesforce can grow earnings faster than analysts expect, but I would wait for a cheaper valuation multiple before buying this stock.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Trevor Jennevine has positions at Amazon and Nvidia. The Motley Fool holds positions in and recommends Amazon, Nvidia, and Salesforce. The Motley Fool has a disclosure policy.
Billionaires are selling Nvidia stock and buying these two artificial intelligence (AI) stocks instead was originally published by The Motley Fool
