Ken Griffin subscribes to the theory that you shouldn't put all your eggs in one basket. His Citadel hedge fund's portfolio includes over 5,800 holdings. How has this highly diversified strategy worked out for Griffin? Quite well, considering he's currently worth roughly $43 billion.
With such a big portfolio, it's not surprising that Griffin owns positions in many artificial intelligence (AI) stocks. Here are his top three AI stocks -- and whether or not they're good picks to buy now.
1. Amazon
Amazon (AMZN 2.61%) ranks as the largest individual stock holding for Griffin and his third-largest holding overall (after two exchange-traded funds). As of June 30, 2024, his hedge fund owned 7.69 million shares of the e-commerce and cloud services giant worth around $1.49 billion. Griffin remains bullish about Amazon, increasing his stake in the stock by nearly 17% in the second quarter of 2024.
NASDAQ: AMZN
Key Data Points
AI permeates practically every part of Amazon's business. The company uses AI to recommend products for online buyers. Its Alexa is one of the most popular AI assistants. Amazon incorporates AI into its search, boosting e-commerce sales. AI helps the company optimize its warehouse operations. And Amazon Web Services (AWS) offers a wide array of AI tools to customers.
Sure, Amazon (like several of its peers) seemed to be initially caught off-guard by the rapid rise of OpenAI's ChatGPT. AWS also faces stiff competition from Microsoft Azure and Alphabet's Google Cloud in providing cloud services.
However, Griffin is smart to have invested so heavily in Amazon, in my opinion. The company is a leader in AI with the resources to remain among the strongest players. Despite the challenges from Microsoft and Google Cloud, AWS remains the top cloud services provider. I think Amazon stock is still one of the best AI picks around.
2. Apple
Apple (AAPL 0.96%) trails behind Amazon as Griffin's second-largest individual stock holding. Citadel owned 5.47 million shares of the iPhone maker worth $1.15 billion at the end of the second quarter of 2024. This reflected aggressive buying by Griffin in Q2: He increased his hedge fund's position in Apple by 93%.
NASDAQ: AAPL
Key Data Points
I suspect that AI was a major reason why Griffin added so much to Citadel's stake in Apple. The company at long last introduced its generative AI capabilities, which it calls Apple Intelligence. Wedbush analyst Dan Ives believes that Apple Intelligence could ignite a supercycle of iPhone upgrades that provide a big tailwind for Apple.
Others aren't so optimistic, though. They think Apple's slow rollout of its generative AI features could backfire. Even if Apple Intelligence does drive incremental growth, much of it could already be baked into Apple's share price with the stock trading at a forward price-to-earnings ratio of close to 30.
I agree to some extent with the skeptics who slam Apple's staggered introduction of its Apple Intelligence capabilities. My hunch is we won't see an overwhelming kick-off of an upgrade supercycle this year. However, I nonetheless expect iPhone sales will increase with momentum potentially accelerating in 2026 and 2027. Apple isn't a slam-dunk near-term pick, in my view, but it's still a stock worth buying for long-term investors.
3. Broadcom
Broadcom (AVGO 0.69%) is Griffin's third-largest AI position and ranks in Citadel's top 10 holdings overall. At the end of Q2, the hedge fund owned 4.84 million shares of the semiconductor and infrastructure software company worth $776.7 million. Griffin increased Citadel's position in Broadcom by roughly 64% in Q2.
NASDAQ: AVGO
Key Data Points
AI is a huge growth driver for Broadcom. CEO Hock Tan said in September that the company expects to generate $12 billion from AI in fiscal year 2024. That estimate reflects 23% of Broadcom's projected total full-year revenue. The company has recently launched multiple new AI infrastructure products, including ethernet networking switches designed to accelerate AI workloads.
However, Broadcom's growth story isn't as rosy as you might think. Excluding the impact of the acquisition of VMware, the company's revenue increased by only 4% year over year in the latest quarter.
But Griffin is bullish about Broadcom. So is Wall Street, with 27 of 29 analysts surveyed by LSEG in October recommending the stock as a "buy" or a "strong buy." I agree with the consensus: Broadcom is a great AI stock to buy and hold.
