Prominent billionaire money managers can't stop buying shares of two Dow Jones Industrial Average stocks whose growth strategies rely on artificial intelligence (AI).
This coming Sunday, May 26, will mark the 128th “birthday” for Wall Street's most famous stock index. Dow Jones Industrial Average (^DJI -1.53%).
When the Dow was first introduced in 1896, it consisted of 12 primarily industrial companies. Today, it is a mix of 30 time-tested, multinational businesses from an assortment of sectors and industries.
While the Dow Jones is historically viewed as the home of mature businesses that deliver modest growth and quarterly dividends, ongoing changes to the index have changed its representation. While some of its components fit the bill as perfectly predictable, low-volatility businesses with market-leading yields (eg, Coca Cola, Johnson & JohnsonAnd Procter & Gamble), growth stocks are also now a significant part of this ageless index.
In particular, companies involved in the rise of artificial intelligence (AI) are represented within the Dow.
Image source: Getty Images.
Dow Jones is home to companies benefiting from the artificial intelligence revolution.
In its simplest form, AI is concerned with software and systems handling tasks that are normally overseen by humans. What gives AI such widespread utility is the ability of these systems to learn and evolve over time. without human intervention (called “machine learning”). Software and systems becoming more adept at what they do, and perhaps even learning new skills or tasks, suggests that AI could change the pace of development for almost every sector and industry.
According to PwC analysts, artificial intelligence could add $15.7 trillion to the global economy by the end of the decade. PwC estimates that $6.6 trillion of this benefit will come from increased productivity, with the remaining $9.1 trillion tracking various side effects of consumption.
Wall Street's smartest, most successful money managers don't want to miss out on this trend — and the latest round of Form 13F filings with the Securities and Exchange Commission (SEC) shows that.
A 13F is a quarterly filing for firms with at least $100 million in assets under management that gives investors access to what Wall Street's top investors bought and sold in the most recent quarter. 13Fs filed with the SEC on May 15 (the last day to report trades for the March-ending quarter) show that the prominent billionaire investor has made two AI Dow stock handovers since the start of 2024. Fist buying.
Amazon
The first artificial intelligence stock billionaire money managers can't stop buying is a company that was added to the Dow Jones Industrial Average in February. I am talking about the world's leading e-commerce company. Amazon (AMZN -1.14%). During the first quarter, nine billionaires bought shares, including (total shares bought in parentheses):
- Israel Englander of Millennium Management (2,390,755 shares);
- Ole Andreas Halverson of Viking Global Investors (1,972,702 shares);
- Chase Coleman of Tiger Global Management (1,438,600 shares);
- Jeff Yass of Susquehanna International (1,336,042 shares);
- Ray Dalio of Bridgewater Associates (1,047,891 shares);
- Dan Loeb of Third Point (900,000 shares)
- Ken Fisher of Fisher Asset Management (785,018 shares);
- Ken Griffin of Citadel Advisors (352,453 shares);
- Philippe Lafont of Coteau Management (241,514 shares);
Amazon is using AI in more ways than I can list. Some of the more prominent examples include deploying AI to improve search functionality for its online marketplace, as well as Amazon Web Services (AWS) users to deliver their message(s) to customers. Generative AI solutions are being relied upon to develop.
Most people are familiar with Amazon because of its dominant e-commerce platform. Last year, Amazon accounted for about 38 percent of US online retail sales. But even with all the revenue it generates from its online marketplace, e-commerce provides Amazon with little in the way of operating cash flow or earnings.
Amazon's bread-and-butter operating segments are AWS, Subscription Services, and Advertising Services.
A strong argument can be made that nothing is more important to Amazon's success than the continued growth of AWS. Enterprise cloud spending is still fairly early in its ramp-up phase, and by the quarter ended in March, AWS had surpassed $100 billion in annual run-rate sales. Because cloud service margins are substantially higher than those generated from online retail sales, AWS typically accounts for more than half of Amazon's operating revenue each year.
Subscription services is another fast-growing segment for the company. In April 2021, then-CEO Jeff Bezos announced that Amazon had surpassed 200 million global Prime subscribers. Not only is this figure likely to increase since the company acquired exclusive rights. Thursday Night Footballbut perks including free two-day shipping and access to the company's content library make it easy for Amazon to raise Prime subscription prices.
Finally, Amazon's ad services segment hasn't grown sales less than 20% a quarter in two years. Maintaining strong ad pricing power is easy when you attract more than 2 billion people to your site every month.
Image source: Getty Images.
Intel
Another AI Dow stock that billionaire investors have been buying since the start of the year is the semiconductor juggernaut. Intel (INTC -4.26%). Intel was added to the Dow in November 1999.
During the first quarter, six high-profile billionaires bought shares of Intel — seven, if you include the recently passed Jim Simons of Renaissance Technologies — including (total shares bought in parentheses):
- Jeff Yass of Susquehanna International (4,836,516 shares);
- Ken Griffin of Citadel Advisors (1,757,626 shares);
- John Overdyke and David Siegel of Two Sigma Investments (1,345,269 shares);
- Israel Englander of Millennium Management (413,507 shares);
- Ray Dalio of Bridgewater Associates (411,473 shares);
While Intel is best known for legacy hardware like the central processing units (CPUs) used in its personal computers (PCs), it is a company that has AI at the forefront of its growth strategy. For example, Intel is adding AI optimizations to its latest developer tools, such as oneAPI and its deep learning OpenVINO toolkit, to help clients use its hardware to build, optimize, and optimize their AI solutions. And can help deploy.
Intel is also developing its Gaudi3 AI accelerator this year. Gaudi3 is a graphics processing unit (GPU) designed to be integrated with the existing infrastructure backbone of the AI ​​revolution. Nvidia. AI-GPUs are effectively the “brains” that allow for faster computations in AI-accelerated data centers, and there has been a huge shortage of these chips for over a year.
Beyond its AI ambitions, the billionaire may be drawn to Intel as a bounceback candidate after a few years of weak PC sales. Despite losing some of its CPU market share in PCs and data centers to main rivals Advanced Micro Devices, Intel still holds the majority of CPU market share in these categories. Although these are no longer fast-growing segments, they provide ample operating cash flow that Intel can reuse in higher growth initiatives.
Besides AI, one of those “high growth initiatives” is its foundry services segment. Building its foundry operations from the ground up to mass production is an expensive process that currently weighs on Intel's bottom line. But by the end of the decade, new chip manufacturing facilities in Ohio and Germany have the potential to propel Intel to No. 2 in global foundry services share.
Finally, Intel's valuation may be compelling for billionaires. The Wall Street consensus calls for Intel to more than triple its earnings per share (EPS) from the reported $1.05 in 2023 to an estimated $3.47 by 2027. S&P 500With a top yield of -1.6%, Intel has a value proposition to offer its patient investors.