Watching what billionaire hedge fund managers do is a great way to test your investment strategy. While it's not advisable to blindly follow them, seeing what they're doing and checking against your own ideas is a good way to see if you're on the same page, especially But when there is a hot trend like artificial intelligence (AI)
The 13F filings for Q1 were recently released, revealing some common themes among hedge funds. While many stocks were bought, there is one clear favorite.
Alphabet was a joint buy among the three hedge funds.
I will focus on three hedge funds: Tiger Global Management, Soros Fund Management, and Bridgewater Associates. These funds are run by billionaires Chase Coleman, George Soros and Ray Dalio respectively. In Q1, these three funds had big purchases. the alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL ). For Bridgewater and Tiger, Alphabet was the most bought stock in Q1.
That's a big vote of confidence for Alphabet, especially since many saw it initially struggle to roll out AI products. However, its Gemini Generative AI technology has improved dramatically and now starts integrating AI into search results to summarize what you've searched for. Many investors have been waiting for Alphabet to announce this technology, and now that it has, it reinforces the fact that Alphabet is a leading player in the technology world.
But that wasn't the only AI stock these hedge funds were buying.
Also bought Bridgewater. Nvidia (NASDAQ: NVDA ) And Meta platforms (NASDAQ: META ). Although Tiger Global didn't buy any of these stocks in Q1, it's already heavily exposed, as Meta and Nvidia make up about 20% and 5% of its portfolio, respectively. As a result, it should not be surprising that Tiger has not added more of these stocks due to its already heavy concentration. Soros Fund Management doesn't own either of these companies, but it's not as tech-heavy as the other two.
Meta is similar to Alphabet because its core business is advertising. So to improve its position in this field, Meta has introduced generative AI tools for advertisers, and is also starting to develop its own chips to process its AI workloads.
Nvidia hardly needs an introduction to the world of AI, as its graphics processing units (GPUs) are at the heart of training and processing AI models. Despite the already massive increase, Nvidia continues to have incredibly strong demand, which will continue until all the AI infrastructure is built.
With billionaires buying these three stocks, investors may be prompted to buy them now. However, these stocks were bought between the beginning of the year and March 31, so the activity has been around for two months. So do they still buy?
Meta and Alphabet are still reasonably priced stocks.
All three businesses are mature companies undergoing major changes. So I will use their forward price-to-earnings (P/E) ratio to value them, as it takes into account changes in the business.
Nvidia trades at a healthy premium to Meta and Alphabet simply because it is growing fast and has the potential to do so for several years. This makes Nvidia a difficult stock to evaluate in the stock market.
Alphabet and Meta trade at very reasonable prices and carry only modest premiums across the board S&P 500Forward P/E of 21.6. Still, each posted solid earnings growth in Q1 (Alphabet's earnings per share rose 62%, while Meta's rose 120%), so they're on the right track.
Of the three, Alphabet and Meta are probably the biggest no-brainer purchases. They are functioning at a high level and can be purchased at a reasonable price. Nvidia needs more work, and investors should understand the expectations surrounding the stock, as they are quite high. But it can still be a viable option for investors.
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Suzanne Frey, an Alphabet executive, is a member of The Motley Fool's board of directors. Randy Zuckerberg, former director of market development and spokeswoman for Facebook and sister of MetaPlatforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Kathan Dre has positions in the Alphabet and Meta platforms. The Motley Fool has and recommends positions in Alphabet, Metaplatforms, and Nvidia. The Motley Fool has a Disclosure Policy.
Billionaires Are Buying These 3 Artificial Intelligence (AI) Stocks Should you buy too? Originally published by The Motley Fool.