Stanley Druckenmiller is something of a prodigy on Wall Street. The billionaire has been a hedge fund manager for more than 30 years.
Druckenmiller founded Duquesne Capital Management in 1981, and his track record of success attracted the attention of another Wall Street legend -- George Soros -- who convinced him to join his Quantum Fund. In 1992 the pair made one of the most audacious and successful bets in investing history, which reportedly "broke the Bank of England." They shorted the British pound, banking more than $1 billion in a single day.
In fact, in all his time as a money manager, Druckenmiller has never had a losing year -- so when he talks, stockholders listen. And the billionaire hedge fund manager sees a significant opportunity, even amid the otherwise challenging environment for investors.
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You can't spell gains without AI
There's been a lot of hype in recent months about the potential for artificial intelligence (AI). But Druckenmiller believes this is a bright spot in this challenging investing landscape, and it could be just the beginning. "AI could be as innovative as the internet," he said in a recent interview.
He provided a real-world example, pointing out that AI is actually increasing productivity for developers creating apps. Druckenmiller noted that AI is already making the top code writers "seven to eight times more productive" than they were just four or five months ago.
Coders can train AI systems to recognize patterns in their code writing process and make predictions about what will come next. This helps eliminate or reduce repetitive aspects of the task. Furthermore, these AI models can create shortcuts for code writing, making the procedure more efficient, while also helping identify errors made during the process.
There are many more potential applications for AI across a variety of industries and sectors in the coming years, but one company stands to benefit more than most from the current explosion of interest in this evolving technology.
Nvidia could run for years
One particularly prominent AI stock Druckenmiller addressed is Nvidia (NVDA 4.35%), saying, "If I'm right on AI, I could own Nvidia for two or three more years."
So, what makes Nvidia such a red-hot AI stock? In short, AI models require a great deal of computational horsepower to train and subsequently run once they've been trained -- a process called "inference."
Nvidia pioneered a computer graphics card, or graphics processing unit (GPU) with parallel processing, or the ability to run a massive number of mathematical calculations simultaneously. Researchers discovered that the same capability that made GPUs adept at rendering images in video games was equally proficient at accelerating the processes used by AI systems.
Druckenmiller pointed out that Nvidia -- like many technology stocks -- bottomed late last year. Since then, however, Nvidia has been on fire, currently priced at more than $380, gaining nearly 240% in less than eight months. As a result, the stock's valuation is now quite high, or "in nosebleed territory," according to the famed investor.
However, AI could act as a secular tailwind for some time, as companies race to adopt this revolutionary technology. If that's the case, Nvidia could be a clear winner for two or three more years.
Druckenmiller acknowledges the stock could "go down materially in the short term" but suggested that the impact of AI makes Nvidia a compelling opportunity to hold for years.
As a longtime Nvidia bull and shareholder, I agree with Druckenmiller's assessment. The tailwinds from the accelerating adoption of AI could go on for years, which is just one reason Nvidia is one of my highest-conviction stocks and makes up roughly 5% of my personal holdings.
