Bill Ackman's hedge fund, Pershing Square Capital Management, outperformed the S&P 500 (SNPINDEX: ^GSPC) by 7 percentage points in the last year and 19 percentage points in the last five years. That makes Ackman a good source of inspiration.
Presently, he has 30% of his portfolio invested in two brilliant artificial intelligence (AI) stocks: 9% is allocated to Amazon (AMZN -0.00%) and 21% is allocated to Uber Technologies (UBER 1.38%). Here's why the stocks are compelling investment ideas.
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Amazon: 9% of Bill Ackman's portfolio
Amazon has a strong competitive presence in three markets. It operates the largest online marketplace in North America and Western Europe as measured by gross merchandise sales. It is the third-largest adtech company as measured by revenue. And Amazon Web Services (AWS) is the largest public cloud as measured by infrastructure and platform services spending.
Amazon is leaning on artificial intelligence across its retail business to improve customer service, product listings, supply chain management, and developer productivity. Brian Nowak at Morgan Stanley says Amazon's retail business could be the most underappreciated generative AI beneficiary in the technology space, and he estimates cost savings initiatives could raise its operating margin by several percentage points.
Meanwhile, AWS is ideally positioned to monetize AI simply because it is the largest public cloud. It accounted for 30% of infrastructure and platform services spending in the recent quarter, while the next closest cloud platform was Microsoft Azure with 20% market share. AWS has also designed custom chips for AI training and inference, and added tools that let developers build generative AI applications and agents.
Importantly, Amazon is positioning itself to monetize AI beyond its core e-commerce and cloud businesses. Its subsidiary Zoox builds robotaxis, and the company will launch its first autonomous ride-hailing service in Las Vegas in 2025, followed by other cities in subsequent years. Morgan Stanley estimates Zoox could have commercial robotaxi services in seven U.S. cities by 2028.
Looking ahead, Wall Street expects Amazon's earnings to grow at 18% annually over the next three years. That makes the current valuation of 35 times earnings look reasonable, especially when the company beat the consensus earnings estimate by an average of 22% in the last six quarters. Patient investors should take a cue from Bill Ackman and buy a few shares of this stock today.
Uber Technologies: 21% of Bill Ackman's portfolio
Uber leads the U.S. ride-sharing market with 76% share, according to Bloomberg. It also ranks second in the restaurant food delivery market with 24% share. That scale affords the company a competitive advantage in that it creates a significant amount of data that lets Uber predict demand, route drivers, and set prices more efficiently over time.
Uber has another important advantage in its ability to offer ride-sharing and food delivery services through a single mobile app. That makes customer acquisition very cost-efficient because the company can cross-sell users on both sides of its platform. For instance, 31% of first delivery trips come from mobility users, and 22% of first mobility trips come from delivery users.
CEO Dara Khosrowshahi recently told analysts that autonomous vehicle (AV) technology will be a $1 trillion opportunity for ride-sharing platforms. Uber is uniquely positioned to benefit given its unparalleled scale. "Uber can deliver the lowest operational costs for our AV partners because we are leaps and bounds ahead on every aspect of go-to-market capabilities," Khosrowshahi said.
Indeed, Uber may not be a traditional AI stock, but it could be a major winner as robotaxis become more prevalent due to the many partnerships it has formed with AV companies, according to Mark Mahaney at Evercore. Most notably, Uber connects riders with Waymo robotaxis in Phoenix, Austin, and Atlanta. And it connects riders with WeRide robotaxis in Abu Dhabi and Dubai, with 15 additional cities to follow in the next five years.
Wall Street estimates Uber's earnings will increase at 26% annually over the next three years, a reasonable estimate given the ride-sharing market is forecast to expand at 21% annually through 2033, according to Straits Research. That makes the current valuation of 16 times earnings look relatively cheap. Long-term investors should feel confident buying a small position in this stock today.
