Artificial intelligence (AI) has gone viral in 2023, fueled by the emergence of next-level chatbots like OpenAI's ChatGPT and Alphabet's (GOOGL 0.52%) (GOOG 0.49%) Bard. These conversational AI models have renewed public interest in AI as the future bears down on us with dizzying speed.

Forecasts vary wildly about the sales potential resulting from these technological gains, but Cathie Wood's Ark Investment Management estimates that AI software could represent a $14 trillion revenue opportunity by 2030. 

Hedge fund billionaires didn't make it big by sticking their heads in the sand, and many have been buying up shares of at a frantic pace. Let's look at two stocks that billionaires have been snapping up like there's no tomorrow.

AI-powered robots sitting at a conference room table while typing on laptops.

Image source: Getty Images.

You can't spell gains without AI

Billionaire investor and hedge fund manager Seth Klarman is an enigmatic figure on Wall Street and a longtime proponent of value investing. Klarman helms the Baupost Group, which has more than $30 billion in assets under management, making it among the largest hedge funds. He has been called "one of the top money managers of all time" by MarketWatch. 

Baupost Group recently made a huge investment in Alphabet. In the fourth quarter, the hedge fund bought 2.61 million shares, increasing its stake by 190% and bringing its total holdings to 3.99 million shares currently worth roughly $104 million. The Google parent now represents more than 6% of Baupost's holdings. 

Alphabet and AI go way back. The company launched the Google Brain neural network in 2011, founded by noted AI researchers Andrew Ng and Jeff Dean, in a bid to develop an AI system that could recognize images. In 2014, Google acquired research company DeepMind to cement its place in AI history. Two years later, DeepMind's machine learning was able to reduce Google's massive data center cooling bill by 40%. 

Partially in response to the fervor ignited by ChatGPT, Alphabet quickly debuted Bard, but a couple of high-profile errors marred its introduction. It's important to remember that Alphabet has been using AI in the background for years and has an arsenal of tools at its disposal, some of which underpin Google search, improve the quality of photos on the Pixel phone, and bring countless customers of Google Cloud into the AI age -- so the best is yet to come.

Consistent with his predisposition toward value investing, it likely wasn't the AI that initially captured Klarman's gaze, but rather Alphabet's bargain-basement price. The stock currently trades for roughly 4 times next year's sales and hasn't been this cheap since mid-2013. 

Next-generation AI processors

Ken Griffin is something of a Wall Street all-star. The founder and CEO of the hedge fund Citadel pocketed roughly $4.10 billion last year, making him one of the most successful hedge funds managers in history. He earned every dollar, too: Citadel smashed records in 2022, with profits of roughly $16 billion, which CNN called "the biggest annual windfall on record." 

Citadel bet heavily on Advanced Micro Devices (AMD 1.05%) late last year, swooping in and buying 5 million shares, increasing its stake by more than 333%. That brings the total to over 6.50 million shares currently worth more than $598 million. 

AMD has a cult following for its graphics processing units (GPUs) used by gamers. The company has pivoted its focus to encompass cloud computing and AI. Earlier this year, AMD unveiled the Ryzen 7040 mobile chip for laptops, which boasts an onboard AI engine -- a first for a CPU. The company plans on expanding its AI chip lineup with the addition of the MI300, an accelerated processing unit (APU) that combines the capabilities of a CPU with integrated graphics. According to CEO Lisa Su, this next-generation semiconductor will accelerate AI systems, while also reducing the amount of time necessary to train them. 

The company earned bragging rights after delivering a record 2022 performance. Full-year revenue grew 44%, though its adjusted profits slipped 25% as AMD increased research and development spending by 25% to capitalize on the opportunity represented by data centers and the increasing adoption of AI. 

While artificial intelligence has generated a great deal of interest, Griffin likely saw a bargain. AMD stock is currently trading for about 5 times next year's sales and hasn't been this cheap since before the pandemic.