So far, Nvidia Artificial intelligence (AI) has been one of the biggest winners of the boom. Shares surged 173 percent over the past year as the company reported unprecedented demand for its graphics processing units, or GPUs, the chips that power all the latest AI systems.
However, some billionaire hedge fund managers reduced their positions in Nvidia during the first quarter, while buying shares of two other AI stocks: Amazon (NASDAQ: AMZN ) And Sales force (NYSE: CRM ).
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Millennium Management's Israel Englander sold 720,004 shares of Nvidia stock, reducing its holdings by 35%. Meanwhile, it increased its positions in Amazon and Salesforce by 32% and 36%, respectively. Excluding options, those stocks rank as his largest and 12th largest holdings, respectively.
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Louis Bacon of Moore Capital Management sold 2,006 shares of Nvidia stock, shedding 19%. It also increased its stake in Amazon by 18 percent and opened a new position in Salesforce. Those stocks rank as his largest and sixth largest holdings, excluding options.
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Philippe Laffont of Coatue Management sold 2,937,060 shares of Nvidia stock, reducing its holdings by 68%. Meanwhile, it increased its position in Amazon by 3 percent and doubled its stake in Salesforce. Those stocks rank as his second and fourth largest holdings, respectively.
Investors shouldn't interpret these trades to mean that Nvidia is a poor investment. All three hedge fund managers still own a stake in the chipmaker. But Amazon and Salesforce warrant further consideration. Here are the important details.
1. Amazon
Amazon operates the largest online marketplace in North America and Western Europe by gross merchandise sales, and its strength in retail has allowed the company to build a booming digital advertising business. Amazon is the largest retail media company in the United States, and the third largest adtech company worldwide. Meanwhile, Amazon Web Services (AWS) leads the market in cloud infrastructure and platform services revenue.
Amazon is using artificial intelligence (AI) to drive efficiency and create monetization opportunities across its various businesses. In e-commerce, it recently announced Rufus, a generative AI shopping assistant that will help consumers search and compare products. Amazon also debuted a creative AI assistant for sellers that streamlines the creation of product pages. Finally, the company uses AI in its logistics business to manage inventory and optimize delivery routes.
In advertising, Amazon uses machine learning to ensure that users see the most relevant ads. This ultimately translates into more successful campaigns for marketers, making Amazon a more attractive advertising partner. The company has also launched a creative AI tool that lets brands transform product profile photos into lifestyle images.
In cloud computing, AWS is already well-positioned to take advantage of 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 lets brands customize pre-trained big language models and build creative AI applications. Amazon Q is a conversational assistant that can summarize information and automate tasks like coding.
Wall Street analysts expect Amazon to grow earnings per share by 24% annually over the next three to five years. This consensus estimate makes its current valuation of 50 times earnings look relatively reasonable. In fact, Amazon is trading near its cheapest earnings multiple in two years. I would feel comfortable buying this AI stock today, and I think patient investors should consider doing the same.
2. Sales force
Salesforce is the market leader in customer relationship management (CRM) software, and has more market share than the next four competitors combined. Its platform brings together productivity applications for sales, customer service, marketing and commerce. Salesforce will undoubtedly benefit as core CRM spending increases, but two new products expand its perceived opportunities in the adjacent areas of data management and automation.
First, the data cloud integrates customer data from all internal sources (Salesforce CRM software) and external sources (third-party data platforms), and it allows users to automate workflows, personalize the customer experience, and more. , and enable this data to develop AI applications. Salesforce CEO Marc Benioff says Data Cloud is the fastest-growing product in the company's history.
Second, Einstein Copilot is a natural language interface that leans on generative AI to automate tasks on the CRM platform. For example, Einstein can summarize information and offer relevant insights for sales and customer service teams. It can also help commerce teams develop digital storefronts, and it can help marketing teams create advertising campaigns.
According to Grandview Research, CRM spending is predicted to grow by 13.9% annually through 2030. The sales force should benefit from this tailwind in any case, but especially because the data cloud and Einstein Copilot add value to existing products and create cross-sell opportunities for the company. In fact, Benioff said he believes “data cloud will become the heart and soul of the Salesforce CRM platform” as businesses invest in AI, simply because AI needs to be rooted in good data to be effective. It is necessary.
Wall Street analysts expect Salesforce to grow earnings per share by 21 percent annually over the next three to five years. This makes its current price of 64.8 times earnings look quite expensive. Sure, Salesforce could grow earnings faster than analysts expect, but I'd wait for a cheap valuation multiple before buying this stock.
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John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, an Amazon subsidiary. Trevor Genuine holds positions in Amazon and Nvidia. The Motley Fool has positions and recommends Amazon, Nvidia, and Salesforce. The Motley Fool has a Disclosure Policy.
Billionaires Are Selling Nvidia Stock and Buying These 2 Artificial Intelligence (AI) Stocks Instead Originally Posted by The Motley Fool