Ken Griffin founded Citadel in 1990. It's now the most successful hedge fund ever. Through Citadel, Griffin built a personal fortune of $37 billion.
Citadel's portfolio is loaded with artificial intelligence (AI) stocks these days, with more than half a dozen of them in its top 50 holdings. There's one, though, that Griffin appears to be especially bullish about. The billionaire has more than tripled his investment in this AI stock.
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Amazon (AMZN 0.75%) ranked as Citadel's fourth-largest holding at the end of 2023. The hedge fund's stake in the e-commerce and cloud services leader was much larger then than it was at the end of September. Griffin bought 4.32 million shares of Amazon in the fourth quarter -- increasing his position by nearly 227%.
The billionaire hedge fund manager has a long history with Amazon. He first initiated a position in the stock in the second quarter of 2013. Griffin sold almost 97% of those shares in the next quarter. However, he later built up Citadel's stake in Amazon again. In the fourth quarter of 2016, though, Citadel fully exited its position in the stock.
Griffin didn't sit on the sidelines for long. In the first quarter of 2017, he again bought shares of Amazon, then added to Citadel's position throughout the rest of the year.
Amazon has been a big winner for Griffin and Citadel. Its shares jumped by more than 200% during the first period when it was in the hedge fund's portfolio. The stock is up by more than 300% since the end of 2017's first quarter.
Amazon's AI arsenal
Griffin probably didn't think of Amazon as an AI stock when he first bought it in 2013. However, the company was already heavily invested in AI technology back then. It began incorporating machine learning (a type of AI) into its e-commerce platform's product recommendations decades ago. And it rolled out Alexa, its AI-powered virtual assistant, in late 2014.
However, I suspect AI was near the front of Griffin's mind when he backed up the truck and loaded up on more Amazon stock in 2023 Q4. In particular, the generative AI boom should provide a huge long-term tailwind for Amazon Web Services (AWS).
AWS launched its Amazon Bedrock service last year to help organizations rapidly build generative AI apps in the cloud. Bedrock provides clients with access to multiple AI models from Anthropic, Cohere, Meta Platforms, Stability AI, and Amazon's own Titan large language models.
Amazon is one of Nvidia's major customers, using its graphics processing units (GPUs) extensively. The company has also built its own AI chips, which offer attractive price performance.
AI remains key to Amazon's e-commerce business as well. Earlier this year, it introduced Rufus, an AI shopping assistant that can converse with customers and help them find the best products to meet their needs.
Should you buy Amazon stock too?
No one should buy any stock just because Griffin or some other famous investor is buying it. Your risk tolerance and investing objectives could be (and probably are) quite different than those of a billionaire hedge fund manager.
That said, I think Amazon would be a great stock to buy right now for many investors -- and not just because of its AI opportunities. Amazon's profitability continues to increase. The company has found a fantastic, fast-growing revenue source with advertising. Even without the lure of AI, customers will continue to move more of their apps and data to the cloud. Amazon should make money for plenty of investors over the next several years, including those of us who are far from being billionaires.
