Billionaire investor Stanley Druckenmiller was busy scooping up a trio of "Magnificent Seven" stocks in the third quarter, adding positions in Amazon (AMZN +1.51%), Meta Platforms (META +0.87%), and Alphabet (GOOGL +3.50%) (GOOG +3.26%). However, the former hedge fund manager (who now just manages his own money) wasn't going all-in on big tech, as he exited his positions in Microsoft and Broadcom.
Let's look at what Druckenmiller might like about these three artificial intelligence (AI) stocks, and consider whether retail investors should follow him into these names.
1. Amazon
NASDAQ: AMZN
Key Data Points
Druckenmiller's biggest individual stock purchase in the third quarter was Amazon. Despite its size, Amazon has been a low-key winner in the AI arena. While it's best known for its e-commerce operations, it is the company's cloud computing unit, Amazon Web Services (AWS), that is actually its largest source of profits. That unit is also its fastest-growing, with revenue growth accelerating to 20% in Q3.
While AWS' growth has trailed peers, it's spending big and starting to gain momentum. Its huge Project Rainer, which uses its custom AI chips to support Anthropic, is just starting to ramp up. Additionally, AWS recently signed a seven-year, $38 billion deal with OpenAI.
Meanwhile, the company is increasing its use of AI and robots internally to make its e-commerce operations more efficient. It's also using AI in its high-gross-margin ad business to improve targeting and campaign creativity. This is leading to strong operating leverage.
With the stock trading at a P/E ratio below the levels of traditional retailers like Costco Wholesale and Walmart, it's easy to see why Druckenmiller likes Amazon's stock.
2. Meta Platforms
NASDAQ: META
Key Data Points
Meta Platforms is also benefiting from AI. Like Amazon, it's using AI to help advertisers on its platforms create better campaigns and improve user targeting. It's also using AI to enhance its recommendation algorithm, which is feeding users more relevant content and keeping them engaged with its apps longer. Combined, this helped drive 26% growth in revenue last quarter, as it saw a 14% jump in ad impressions and a 10% increase in average price per ad.
Meanwhile, Meta has nice opportunities in front of it with WhatsApp and Threads. It's just starting to serve ads on both platforms, so there is a long potential runway for revenue growth. WhatsApp has more than 3 billion users, and while most are in international markets, this is still a big opportunity. At the same time, it continues to build out Threads.
Meta is also the cheapest of the Magnificent Seven stocks, trading at a forward price-to-earnings ratio of under 19.5 times 2026 analyst estimates.
Image source: Getty Images.
3. Alphabet
NASDAQ: GOOGL
Key Data Points
Alphabet is arguably one of the companies that's best positioned to profit from AI. Its cloud business is growing swiftly, with revenue soaring 34% and operating income skyrocketing 89% last quarter. Moreover, it's the cloud company with the most complete tech stack, and with its pending acquisition of cloud security company Wiz, the best could still be ahead.
Alphabet can supply its customers with end-to-end solutions. Its Gemini foundational large language model (LLM) is among the best currently on the market, and Alphabet is far ahead of its rivals with custom AI chips. It began developing its tensor processing units (TPUs) more than a decade ago, and is now on the seventh generation of those specialized AI accelerators. This gives its AI data centers advantages in performance, efficiency, and cost that will only become more important in the coming years.
Meanwhile, its search business is also benefiting from AI, which is helping drive growth in queries. This could also be seen last quarter as its search revenue growth accelerated to 15%. The company has huge distribution and data advantages, which create a wide moat, even as search and AI chatbots meld into one service. Meanwhile, its YouTube streaming business is seeing robust growth (15% in Q3), and it has attractive speculative bets that could pay off handsomely in the long term with its Waymo robotaxi business and its quantum computing unit.
Trading at a forward P/E of around 25 times 2026 analysts' estimates, Alphabet looks attractively priced, given the long-term opportunities in front of it.
