Billionaire Stanley Druckenmiller ran the hedge fund Duquesne Capital between 1981 and 2010. He earned an average return of 30% annually without a single down year, an accomplishment that is unheard of even among professional money managers.
Druckenmiller no longer manages money for clients, but he does manage his family wealth through Duquesne Family Office, which means investors can still track his portfolio using 13F forms. Druckenmiller made two particularly interesting trades in the fourth quarter.
- He sold his entire position in Sandisk (SNDK 5.69%), a stock up 1,470% since it was spun off from Western Digital last year.
- He started a new position in Amazon (AMZN 1.52%), a stock up 223,000% since its 1997 initial public offering (IPO).
Here's what investors should know about these artificial intelligence (AI)stocks.
Image source: Getty Images.
1. Sandisk
Sandisk designs storage products based on NAND flash technology, including embedded drives for edge devices (personal computers, automotive systems, gaming consoles) and solid-state drives (SSDs) for data centers. The company realizes cost savings and supply chain security through its joint venture with Japanese manufacturer Kioxia, as they share expenses related to fabrication equipment and memory design.
Demand for artificial intelligence infrastructure has led to an unprecedented supply shortage in NAND flash memory, such that prices have tripled in the past year. Sandisk has benefited greatly. Revenue soared 61% to $3 billion in the January quarter, driven by especially strong sales growth in the data center segment, and non-GAAP (adjusted) earnings rose 404% to $6.20 per diluted share.
However, Sandisk is the fifth-largest supplier of NAND flash memory, and there is nothing especially unique about the company, which means substantial market share gains are unlikely. "We don't believe Sandisk holds an economic moat," Morningstar analyst William Kerwin wrote in a recent note. "We view flash memory chips as commodities that don't command any pricing power."
So what? The memory chip industry is notoriously cyclical. The memory supply shortage will eventually become a supply glut, at which point prices will drop. Sandisk trades at 75 times adjusted earnings today, a reasonable price for a company whose adjusted earnings are forecast to grow at 155% annually through the fiscal year ending in June 2028.
However, Sandisk's valuation is likely to collapse once it becomes clear the memory chip cycle has passed its peak, at which point shares could fall sharply. The stock is particularly risky because no one knows exactly when that will happen. In that context, Druckenmiller's decision to sell Sandisk makes sense even though the stock has continued to soar in 2026.
NASDAQ: SNDK
Key Data Points
2. Amazon
Amazon has a strong position in three large industries: It operates the largest e-commerce marketplace in North America and Western Europe, it is the largest retail advertiser in the world (and the third-largest adtech company overall), and Amazon Web Services (AWS) is the largest public cloud in terms of infrastructure and platform services spending.
Amazon is using artificial intelligence to reinforce its competitive position in those markets. It has developed hundreds of generative AI tools that make its retail business more efficient by optimizing inventory placement, warehouse workflows, and last-mile delivery. Amazon is also developing AI frameworks that help robots navigate fulfillment centers and process commands in natural language.
In a recent note, Morgan Stanley analysts led by Brian Nowak listed Amazon as one of the companies best positioned to benefit from physical AI and robotics in the coming years. Despite heavy spending on capital expenditures, they expect Amazon's operating margin to expand by 2 percentage points in each of the next three years, taking it from 11.1% in 2025 to 17% by 2028.
Meanwhile, AWS operates the largest public cloud. That scale alone leaves the company well positioned to monetize AI simply because it already has so many customers. CEO Andy Jassy explains, "AWS is where the preponderance of companies' data and workloads reside, and part of why most companies want to run AI on AWS."
However, AWS is also leaning into demand for artificial intelligence with new products and services across its computing stack. The company has also positioned itself as the primary cloud provider to Anthropic. In turn, AWS revenue growth accelerated to 24% in the fourth quarter, the fastest pace in 13 quarters, driven in part by triple-digit sales growth in custom chips.
Wall Street estimates Amazon's earnings will increase at 19% annually through 2028. That makes the current valuation of 30 times earnings look quite reasonable. I think Druckenmiller made a smart move in adding Amazon to his portfolio. More importantly, the current price is still attractive, so it's not too late for patient investors to make the same decision.
