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Two billionaire investors are selling Nvidia and buying these artificial intelligence (AI) stocks instead

It’s no secret that artificial intelligence (AI) is the hottest game in town for investors. Much of the big gains for the stock market in 2023 and 2024 will come from growing interest in all things AI.

No company has been at the forefront of the AI ​​boom more than Nvidia (NASDAQ: NVDA). The chipmaker’s stock price shot up 239% last year and is up nearly 75% this year. But is the excitement about Nvidia starting to fade? Maybe. Two billionaire investors sell Nvidia and buy another AI stock instead.

Thumbs down to Nvidia

David Tepper is known to many as the owner of the Carolina Panthers. However, he raised enough money to buy the NFL franchise by achieving huge success with the hedge fund he founded in 1993, Appaloosa Management. Today, Tepper’s net worth is $20.6 billion.

Tepper is optimistic about AI. Eight of the top 10 holdings in Appaloosa’s portfolio are AI stocks. Nvidia ranks fourth among hedge funds, but Tepper seems to think the stock’s tremendous momentum is nearing an end. In the fourth quarter of 2023, he sold nearly 23% of Appaloosa’s stake in the graphics processing unit (GPU) maker.

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He’s not the only billionaire investor who is now noticeably less enthusiastic about Nvidia. Chase Coleman first made a splash in the investment world by teaming up with legendary hedge fund manager Julian Robertson. Coleman went on to run his own hedge fund, Tiger Global Management, which later evolved into venture capital. He is now worth $5.7 billion.

Tiger Global Management cut its position in Nvidia by almost 13% in the fourth quarter. Nvidia still claims the No. 10 position in the hedge fund’s portfolio with a stake valued at about $480 million at the end of 2023. However, Coleman is taking some of his profits from the stock off the table after making big gains.

Thumbs up to Amazon

Both Tepper and Coleman saw it Amazon (NASDAQ: AMZN) as a better AI stock to buy in the fourth quarter. Tepper’s Appaloosa fund has increased its position in the e-commerce and cloud services giant by more than 5%. Coleman’s Tiger Global Management increased its stake in Amazon by 24%.

Why are these two billionaire investors more bullish on Amazon than Nvidia? My guess is that Tepper and Coleman think Nvidia’s valuation is now at a level where any sign of trouble could trigger a steep sell-off. At the same time, Amazon appears to be building sustainable momentum.

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AI is definitely a key growth driver for Amazon. The company’s cloud platform, Amazon Web Services (AWS), is the largest provider of cloud services by market share. AWS is investing especially heavily in supporting generative AI development.

Amazon also uses generative AI internally. CEO Andy Jassy said during the company’s Q4 earnings conference call: “[W]Believe it [generative AI] will ultimately generate tens of billions of dollars in revenue for Amazon in the coming years.”

Of course, Amazon isn’t just an AI stock. The company’s efforts to increase profitability in its e-commerce business continue to pay off. Amazon has achieved seven consecutive quarters of operating margin improvement in its North American business segment.

It has also become a major player in the digital advertising market. Amazon’s ad revenue rose 26% year over year in the fourth quarter. And that growth came before the company launched its ads on Prime Video.

Buying more shares of Amazon has already paid off for Tepper and Coleman. The stock is up more than 20% year to date.

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Should you also buy Amazon?

Investors shouldn’t sell Nvidia and buy Amazon just because two hedge fund billionaires did so. However, it’s not a bad idea to explore the possible reasons behind Tepper and Coleman’s moves.

I think the reasons why Tepper and Coleman added more Amazon stock in the fourth quarter still apply today. The company’s profits will likely continue to rise. AI and advertising remain strong growth drivers. Amazon is still an excellent long-term choice in my opinion.

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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. Keith Speights has positions in Amazon. The Motley Fool has and recommends positions in Amazon and Nvidia. The Motley Fool has a disclosure policy.

Two billionaire investors are selling Nvidia and buying these artificial intelligence (AI) stocks instead. originally published by The Motley Fool

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