Stanley Druckenmiller took a sizable position in Nvidia (NVDA -2.44%) shortly after ChatGPT's release. The famous investment manager typically takes a top-down approach to investment themes, buying groups of stocks poised to benefit from trends such as artificial intelligence. That means he has owned stakes in Nvidia, Broadcom (AVGO -0.72%), Micron Technology (MU -4.80%), and Intel (INTC -5.10%), among other big semiconductor companies, at various points during the last few years.
Druckenmiller sold out of his Nvidia position in 2024. Last quarter, he exited from his positions in Broadcom, Intel, and Micron. Only one big AI chipmaker remains in his portfolio, although he has kept stakes in a few smaller ancillary AI-related semiconductor companies. In fact, Druckenmiller opened that position during the same period that he sold his other major semiconductor stocks.
Here's the chipmaker that Druckenmiller's betting on.
Stanley Druckenmiller. Image source: Getty Images.
Why Druckenmiller bought AMD
While Druckenmiller was selling some of the biggest names in the AI chip space, he was buying AMD (AMD -3.28%). The veteran chipmaker makes graphics processing units (GPUs), but its strength has long been in central processing units (CPUs). And while GPUs, with their massive parallel processing power, were the chips in highest demand during earlier phases of the AI infrastructure build-out, the market for data center CPUs is growing rapidly due to the expected rise in the use of agentic AI, a technology that requires far more CPUs to support than AI training does.
That could be important for AMD's future as it introduces its rack-scale solution, Helios, to the market later this year. A rack-scale solution treats the entire server rack, including GPUs, CPUs, networking chips, and other equipment, as a single unit, providing a highly efficient system and concentrating sales with a single provider.
During the company's second-quarter earnings call, management noted that "customer pull for Helios is very strong and tracking ahead of our initial forecast." It has already announced deals with OpenAI, Meta Platforms, and Anthropic. AMD also plans to release new rack-scale systems every year.
AMD's position as a leading designer for both GPUs and CPUs is key. Its biggest competitors, Nvidia and Intel, specialize in one or the other. That said, Nvidia has made significant progress in CPU design.
Nonetheless, AMD has seen strong sales of server CPUs. Management expects its CPU segment to generate 80% revenue growth in the second half of 2026 and 70% growth in 2027.
NASDAQ: AMD
Key Data Points
Its GPU business should get a boost from Helios. Management said it expects GPU growth to be well in excess of 100%, driving total data center revenue to more than double next year. That could ultimately result in AMD delivering better revenue growth than Nvidia in 2027. Nvidia is currently guiding for top-line growth of 70% next year.
Is the stock too expensive?
AMD now trades at 63 times forward earnings, a ratio that's more than double that of rival AI accelerator designers Nvidia and Broadcom, but in line with fellow CPU leader Intel. That premium speaks to the expectations that AMD's revenue will accelerate next year, and that its earnings will follow suit.
Analysts currently forecast that its earnings will double next year and grow by another 50% the following year. That's far better earnings growth than what's expected from Intel or Nvidia. Analysts have similar expectations for Broadcom's growth, though.
That said, the market's actual expectations for AMD may be even higher than those that have been explicitly forecast by analysts. The stock fell significantly after its most recent earnings report despite the company delivering very strong results.
NASDAQ: INTC
Key Data Points
Micron, meanwhile, trades at a low price-to-earnings multiple, but as a memory specialist, it faces much greater cyclical demand risk than the makers of cutting-edge processors. It also must contend with the market's high expectations, which were demonstrated again recently when positive news about the outlook for the memory segment failed to lift its stock price.
Druckenmiller seems to think that, despite the high expectations for AMD on Wall Street, the market may be underestimating the company's ability to grow its share of the data center market through its Helios rack-scale solution. Early indications for demand are strong, but the proof will come over the next year and a half as OpenAI, Meta, and Anthropic put the first systems into use.
