Looking at what billionaire hedge fund managers are doing is a great idea for investors, as it gives you a chance to see what top minds in the investing world think about trends like artificial intelligence (AI). If these massive funds start to sell out of their positions, it could be a warning sign for investors that the party is over. But if they're increasing their stakes, it could be a bullish indicator.
Three prominent hedge fund managers recently increased their stakes in some of the top names in AI. All three purchases indicate that the AI arms race is gaining momentum, and there is still significant room for these top AI picks to make investors substantial profits.
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1. Philippe Laffont: Nvidia
Philippe Laffont runs Coatue Management, and recently made purchases of one of the most prominent stocks in the AI realm: Nvidia (NVDA 1.65%). Investors gained access to this information after its Form 13F was made available to the public 45 days after Q2 ended. This is an SEC requirement for any fund that has more than $100 million under management so investors can track billionaire hedge fund managers' moves over time.
In Q2, Coatue Management increased its Nvidia stake by 34%. This is notable, as it sold off Nvidia stock over the past three quarters. Coatue sees momentum in Nvidia's stock, and it makes sense when you look at the business.
Nvidia is about to benefit from some major tailwinds, including gaining its China export business back once the U.S. government approves its export license. Additionally, the AI hyperscalers are all announcing record data center capital expenditures for next year, which bodes well for increased GPU demand.
Although Nvidia has been one of the top-performing stocks over the past few years, there is still plenty of room for it to run, with massive AI computing demand still being fulfilled.
2: Bill Ackman: Amazon
Bill Ackman, who runs Pershing Square Capital Management, unveiled a massive, $1.28 billion stake in Amazon (AMZN 3.12%) during Q2. This makes up about 9.3% of its portfolio, so this is no small bet.
It's also a smart one, as Amazon has extensive exposure to the AI space through its cloud computing platform, Amazon Web Services (AWS). AWS allows clients to rent computing power from Amazon's servers to run AI workloads on. Computing clusters are expensive to build for fledgling AI companies, so renting makes a ton of sense here.
Additionally, AWS is a huge part of Amazon's profit picture, making up 53% of total operating profits in Q2.
Amazon is a smart AI stock pick, and with Ackman bullish on it, it's a great sign for investors.
3. Stanley Druckenmiller: Taiwan Semiconductor
Last is Taiwan Semiconductor (TSM 2.58%), which Duquesne Family Office's Stanley Druckenmiller purchased. It increased its stake by 28% in Q2, making Taiwan Semi the fifth-largest position in its portfolio. However, Taiwan Semiconductor is the firm's largest exposure to AI, making it a huge bet by the firm.
Taiwan Semiconductor is a chip manufacturer that produces chips for some of the biggest names in the tech industry, like Apple and Nvidia. It has huge momentum and is putting up excellent growth. In Q2, TSMC's revenue increased by 44% in U.S. dollars, and that growth appears to be sticking around.
As demand for AI computing power increases, so will chip demand. Because TSMC is a critical supplier to nearly every company in this space, it appears to be a top stock pick to capitalize on the AI build-out.
