Over the past two years, no trend has given more enthusiasm to Wall Street’s move than the bull run Artificial Intelligence (AI). The ability of AI-based software and systems to grow more efficiently at their tasks, as well as evolve to learn new functions without the need for human intervention, gives this technology an almost limitless long-term ceiling.
Although growth estimates vary widely, analysts at PricewaterhouseCoopers see the AI market as potentially worth $15.7 trillion by 2030. Determine the size of the awardIncreased productivity will boost global GDP by $6.6 trillion, with consumption spillovers adding another $9.1 trillion.
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This expected outperformance and high ceiling for AI is not lost on Wall Street or its major investors. Thanks to Form 13Fs filed quarterly, investors can track which AI stocks top money managers are buying and selling.
Based on the latest round of 13Fs, covering trading activity through the end of September, there are clearly three billionaire asset managers in AI stocks they would like to own through 2025.
the first It seems billionaires of AI stocks can’t get enough of it As we move forward into the new year he specializes in networking solutions Broadcom(NASDAQ:AFGO). Based on 13Fs for the quarter ended September, billionaires Philippe Lafont of Coatue Management (1,488,666 shares purchased) and Stanley Druckenmiller of Duquesne Family Office (239,980 shares purchased) were buyers.
Just as Nvidia(Nasdaq: NVDA) Broadcom has become the undisputed top choice as a supplier of graphics processing units (GPUs) for companies wanting to build AI-accelerated data centers, and Broadcom has become a major provider of networking solutions within those data centers. The company’s Jericho3-AI fabric is capable of delivering up to 32,000 GPUs, which is essential for maximizing GPU computing capabilities and reducing latency.
Additionally, Broadcom is ideally positioned to capitalize on enterprise demand for its custom AI chips. By fiscal 2027, CEO Hock Tan believes the company’s AI revenue could rise to between $60 billion and $90 billion from the $12.2 billion reported in fiscal 2024 (the fiscal year ending November 3). Demand from the company’s large-scale customers should fuel this growth.
Perhaps the most enticing aspect of Broadcom for Laffont and Druckenmiller is that it is much more than just AI stocks. It is a leading supplier of wireless chips and accessories used in smartphones, supplies a laundry list of optical sensors to the industrial sector, and has a range of cybersecurity solutions. If an AI bubble forms, Broadcom will be better suited than Nvidia to weather the storm.
The big question for these two billionaires is: “Can Broadcom maintain its trillion-dollar value?” Although sustained double-digit growth seems likely, Broadcom is trading at a price-to-sales multiple Goodabove Its historical average. We could see the company’s shares falter until its valuation becomes more acceptable.
Image source: Getty Images.
The second AI stock that billionaire money managers can’t stop buying before 2025 is the world’s leading chip maker. Taiwan Semiconductor Manufacturing Co., Ltd(NYSE: TSM). During the third quarter, Tiger Global Management billionaire Chase Coleman acquired 564,090 shares, while Duquesne Chairman Stanley Druckenmiller acquired 57,355 shares.
Taiwan Semi is being relied upon by leading companies in the AI industry, including Nvidia, to dramatically increase the production of GPUs. Based on recently updated targets following Donald Trump’s November victory, Taiwan Semi aims to reach a monthly wafer-on-substrate (CoWoS) capacity of 35,000 in 2024, 75,000 units in 2025, and 135,000 units in 2026. For memory packaging High-bandwidth technology that supports AI-accelerated data centers.
Taiwan’s semiconductor manufacturing should also continue to benefit from the long backlog of AI chips. As long as AI-GPU scarcity continues, the company’s operating cash flow can remain largely predictable.
The big question that billionaires Coleman and Druckenmiller have to ask themselves is: “To what extent might Trump’s trade policies affect the company?” The next president’s first focus on America and expected reliance on tariffs could present challenges for Taiwan Semi, which has 80% to 90% of its production capacity in Taiwan. Restrictions on the export of AI chips and equipment to China, imposed by the Biden administration, may also pose a challenge.
As with Broadcom, semiconductor manufacturing in Taiwan is no longer the massive core deal it has been for years. The price-to-sales (P/S) ratio is 45% above the five-year average P/S reading, while the forward price-to-earnings (P/E) ratio of 23 represents its highest reading since 2020. It’s an aggressive valuation to… Some extent to Extremely Cyclical industry.
The third artificial intelligence stock that billionaire investors cannot stop buying before the new year is the e-commerce giant Amazon(Nasdaq: AMZN). There were four billionaire buyers in the quarter ended September, including (total shares purchased in parentheses):
Stephen Mandel of Lone Pine Capital (1,033,987 shares)
Philippe Lafont of Coatue Management (496,218 shares)
Larry Robbins of Glenview Capital Management (125,000 shares)
Chase Coleman from Tiger Global Management (94,408 shares)
Amazon’s AI relationships are mostly usage-based. Amazon Web Services (AWS) is the world’s leading cloud infrastructure platform, aggressively integrating generative AI solutions. Generative AI on AWS can help companies build AI applications, deploy virtual chatbots and AI assistants, and build/run large language models.
Of Amazon’s many operating segments, none are more important to generating cash flow or profits than AWS. Through the first nine months of 2024, AWS accounted for 17.5% of Amazon’s net sales, but nearly 62% of its operating income. The impressive margins that typically accompany cloud subscriptions will play a major role in lifting a company’s cash flow over time.
Amazon is also developing its own AI chips, known as Trainium2 and Inferentia. Although Amazon already uses Nvidia’s flagship GPUs, and its own chips are unlikely to rival Nvidia’s in terms of computing speed, the Trainium2 and Inferentia should be significantly cheaper and more accessible than Nvidia’s coveted hardware.
Like Broadcom and Taiwan Semi, the biggest concern for Mandel, Laffont, Robins and Coleman is whether Amazon shares are still a bargain after hitting all-time highs. While traditional fundamental tools like the P/E ratio may suggest that Amazon is more than fully valued, the company’s P/E ratio suggests it still offers upside. At 16 times its estimated 2025 cash flow, Amazon is still well below the 23 to 37 times cash flow multiple that investors regularly paid for its stock throughout the 2000s.
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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. Sean Williams He has jobs at Amazon. The Motley Fool has positions in and recommends Amazon, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has Disclosure policy.
