Stanley Druckenmiller is one of the most successful investors of all time.
Working under George Soros, Druckenmiller helped guide the strategy that "broke the bank of England," making them more than a billion dollars in 1992 by shorting the British pound, leading to its crash.
However, that trade wasn't a fluke. After starting Duquesne Capital Management in 1981, Druckenmiller's hedge fund never had a down year, a period that included the Black Monday crash, the dot-com bust, and the great financial crisis. Duquesne Capital Management averaged an annual return of 30% from 1986 to 2010, crushing the broad market.
Druckenmiller closed his fund in 2010, but he didn't stop investing. Today, he runs the Duquesne Family Office, which has about $3.4 billion in assets as of its fourth-quarter update. Recently, the famed investor has been an outspoken bull on AI stocks. Like a number of other CEOs and investors, the billionaire sees it as a major innovation, saying last year, "AI could be as transformative as the internet."
Not surprisingly, AI stocks make up a sizable portion of his portfolio. In fact, just three AI stocks account for 40% of his holdings. Let's take a look at those stocks and see if any are worth buying today.
Image source: Getty Images.
1. Nvidia
It might not be a surprise to see Nvidia (NVDA 6.18%) at the top of this list. Nvidia has dominated the AI narrative, and it's been the biggest winner by market cap, up by more than $1.5 trillion since the start of 2023.
At the end of 2023, Druckenmiller owned 617,494 shares worth roughly $306 million and call options on the stock worth another $242 million. Combined, those holdings make up 16% of his portfolio. Considering that Nvidia has soared since the start of the year, those options could have paid off handsomely for the billionaire investor.
Druckenmiller began buying Nvidia in the fourth quarter of 2022, indicating that he jumped on the stock after ChatGPT was launched, which signaled the start of the AI boom. The investor said in the fall that Nvidia stock was in "nosebleed territory," but shares have continued to rally, and his call buying in Q4 indicates he changed his mind on that synopsis, though he did cut his stake in Nvidia stock by 30% in Q4. It's unclear if he's sold any of his Nvidia stock in Q1 so far, but based on its current price, the right move would have been to hold onto it.
2. Microsoft
After Nvidia, Microsoft (MSFT 1.82%) may be the next-best-known AI stock. The tech giant has been a close partner of ChatGPT parent OpenAI, having invested billions into the AI start-up, and that's given it an edge in the new technology. It's incorporated OpenAI features across its products, including Azure, GitHub, Bing, and its Office suite, and it's designed its own ChatGPT-like Copilot to answer questions, improve communications, and guide users.
Druckenmiller isn't a newcomer to Microsoft. He first began buying the stock in 2015, and he added to his stake in Q4, buying 68,860 shares to bring the total to 1.09 million, or $408.4 million. Microsoft is his largest outright stock holding and accounts for 12% of his portfolio.
Notably, in Q4, Druckenmiller dumped his entire stake in Alphabet, Microsoft's rival, indicating a clear preference for Microsoft. That decision seems to have paid off, as Microsoft is up 10% this year, while Alphabet is down slightly.
3. Coupang
South Korean e-commerce leader Coupang (CPNG -0.52%) may not be an AI stock in the traditional sense, but the company is doing things with artificial intelligence that earn it a place in the category.
Coupang uses artificial intelligence in a variety of ways, including robots at its fulfillment center that can carry more than 2,000 pounds and are called autonomously guided vehicles as they direct themselves around the warehouse. They have cut the human workload by about 65%.
Coupang also uses AI to help warehouse workers, giving each employee a personal digital assistant (PDA) that will assign work and optimize routes using AI and machine learning.
Druckenmiller owned 22.9 million shares of Coupang as of the end of the year, adding 2 million shares to his holdings in Q4 to bring the total stake to $371 million, or 11% of his portfolio. He's owned the Korean e-commerce stock since before it went public. It's not fully clear why Druckenmiller is betting on Coupang, but the stock offers appealing growth at a good value right now.
Which of these AI stocks are buys?
Of these three stocks, I think Nvidia and Microsoft look like solid buys. Yes, the shares have run up considerably over the last year, but these companies are the respective leaders in their segments of AI (Nvidia in hardware and Microsoft in software), and those leadership positions are likely to pay off in the coming years.
Coupang seems promising as well but riskier. The company is delivering solid growth and trades at a reasonable valuation. However, its long-term growth seems to depend on expanding beyond South Korea and into new markets, as it's already heavily penetrated in its home market. That could pay off for the company, especially as "developing offerings" delivered 105% revenue growth to $273 million in Q4, but it's a riskier strategy.
Overall, investors are better off sticking with Nvidia and Microsoft here. If you're an AI investor, it makes sense to follow Druckenmiller's comments and moves as the investing landscape develops. The billionaire called the Nvidia rally, and he may have some foresight into where the AI boom goes next.
