Data is the fuel that keeps Wall Street's engine running -- and investors are rarely, if ever, hurting for information. Between earnings season (the six-week period each quarter when most S&P 500 companies report their operating results) and economic data releases, it can be easy for something important to fall through the cracks.
For example, investors may have completely overlooked that e-commerce juggernaut Amazon (AMZN +4.34%) sold its entire stake in Wall Street's quantum computing darling IonQ (IONQ +7.93%) and artificial intelligence (AI) giant Advanced Micro Devices (AMD +3.39%), which is also known as "AMD," during the September-ended quarter.
Nov. 14 marked the deadline for institutional investors with at least $100 million in assets under management (AUM) to file Form 13F with the Securities and Exchange Commission. This filing details which stocks, exchange-traded funds (ETFs), and select options Wall Street's smartest money managers bought and sold in the latest quarter (in this instance, the quarter ended in September).
Image source: Getty Images.
However, 13Fs aren't just limited to hedge funds and billionaire investors. Public companies with $100 million or more in AUM are also required to file a 13F. When the third quarter came to a close, Amazon was overseeing close to $2.5 billion in AUM.
Although Amazon's stake in electric-vehicle maker Rivian Automotive accounts for more than 94% of its invested assets, it's the company's selling activity in IonQ and AMD that really stands out.
The quantum computing bubble may be bursting
Quantum computing is, arguably, the hottest trend of the year. Quantum computing relies on specialized computers and the theories of quantum mechanics to solve complex problems that classical computers can't perform during our lifetime, or simply can't do.
For example, quantum computers can be used to run rapid, simultaneous molecular interaction simulations to assist drug developers. These simulations can improve clinical trials and aid drugmakers in targeting hard-to-treat/deadly diseases. This is just one of the real-world use cases that has Boston Consulting Group estimating this technology will create $450 billion to $850 billion in global economic value by 2040.
NYSE: IONQ
Key Data Points
Among quantum computing pure-play stocks, IonQ has led the charge. Its market cap neared $30 billion in mid-October, with investors clearly excited about Amazon allowing subscribers of its quantum cloud-computing service, Braket, access to IonQ's specialized computers. IonQ's quantum computers are also available via Microsoft's Quantum Azure service and through Alphabet's Google Cloud Marketplace.
Despite this excitement and the 272% rally in IonQ shares over the trailing-two-year period, which ended Nov. 14, Amazon sold all 854,207 shares of IonQ stock during the third quarter.
Profit-taking might explain some or all of this decision. During the third quarter, shares of IonQ rallied from the low $40s to the mid-$70s, providing plenty of opportunity for Amazon to lock in substantial investment gains.
But historical headwinds may have also played a role in Amazon's decision to exit this position.
Since the internet began going mainstream roughly 30 years ago, we haven't witnessed a game-changing technology or hyped innovation avoid an eventual bubble-bursting event. Investors have regularly overestimated the early stage adoption, utility, and optimization of new technologies or trends. There's little evidence to suggest that quantum computing is being broadly commercialized, or that any public companies are generating a positive return on their quantum computing investments.
Furthermore, IonQ's valuation is unsightly. Prior bubbles, such as the dot-com bubble, show that companies leading the charge frequently topped out at trailing-12-month (TTM) price-to-sales (P/S) ratios ranging from 30 to 40. IonQ's TTM P/S ratio clocked in at almost 147, as of the closing bell on Nov. 14. Even with rapid sales growth, IonQ's stock has no chance of escaping historical bubble territory.
Image source: Getty Images.
Amazon bids adieu to AMD
Unlike quantum computing, artificial intelligence has had years to begin maturing. Demand for AI infrastructure, including the graphics processing units (GPUs) that act as the brains of AI-accelerated data centers, has been phenomenal. It's likely one of the reasons the analysts at PwC foresee this technology adding $15.7 trillion to global gross domestic product by 2030.
On paper, AMD has several catalysts working in its favor. The insatiable demand for AI-GPUs, coupled with Nvidia's (NVDA +4.84%) next-generation GPUs being backlogged, points to stronger pricing power.
Additionally, AMD landed a brand-name partnership with privately held OpenAI last month, which will see the latter deploy six gigawatts of AMD GPUs over a multiyear agreement. Brand-name collaborations help validate the potential for AMD's AI hardware.
Nevertheless, Amazon dumped the entirety of its 822,234-share stake in Advanced Micro Devices at some point during the third quarter. As of June 30, this represented a $117 million position, Amazon's second-largest holding, behind Rivian.
NASDAQ: AMD
Key Data Points
Similar to its situation with IonQ, Amazon may have sold to lock in profits. This position was opened during the first quarter, which saw AMD stock hover between $100 and $120. By the third quarter, AMD shares were regularly trading hands between $140 and $175. In just a few months, Amazon netted itself a handsome gain.
Yet other factors may have played a role in Amazon's decision to axe AMD.
For example, the compute superiority of Nvidia's Hopper (H100), Blackwell, and Blackwell Ultra GPUs makes them the preferred choice by businesses. While some enterprise customers are choosing AMD, Nvidia's leading hardware has led to a monopoly like hold on GPU market share in high-compute data centers. This isn't to say AMD can't eventually succeed, so much as to point out how far behind Nvidia it currently is.
There's also the potential for historical precedent to come into play. The same principles described above for quantum computing, concerning investors overestimating the uptake, utility, and optimization of a new technology, also hold true for artificial intelligence. With most businesses far from optimizing this technology, the door appears to be wide open for an AI bubble to form and burst. If that were to happen, AMD stock would undoubtedly be hit hard.
Its valuation is concerning, too. Although AMD's sales growth rate has picked up, its forward price-to-earnings (P/E) ratio of 38 represents a 27% premium to its trailing-five-year average forward-earnings multiple.
