Nvidia It was the best performing stock among the S&P500 last year. The company's stock price rose 239% as artificial intelligence (AI) sent Wall Street into a frenzy.
But several hedge fund billionaires began diversifying away from Nvidia in the fourth quarter, simultaneously buying Nvidia stock. Amazon (NASDAQ:AMZN).
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Moore Capital Management's Lewis Bacon sold 873,000 Nvidia shares, reducing his holdings by 99%. At the same time, he increased his Amazon stock by more than 1,000%, and Amazon stock now ranks as his No. 3 position.
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Millennium Management's Israel Englander sold 1.7 million Nvidia shares, reducing his holdings by 45%. He also increased his stake in Amazon by 1% at the same time, which now ranks him as his No. 4 position (excluding options).
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Steven Cohen of Point72 Asset Management sold 1.1 million shares of Nvidia stock, reducing his holdings by 66%. At the same time, he increased his stake in Amazon by 11%, making it his largest position (excluding options).
The deal between Mr. Englander and Mr. Cohen is particularly noteworthy. Because they run two of the most successful hedge funds in history. Specifically, as of December 2023, Millennium Management ranks second and Point72 Asset Management ranks 13th in terms of net income since inception, according to LCH Investments.
However, investors should not interpret their trades to mean Nvidia is a bad investment. None of the fund managers completely exited their positions in the AI chipmaker, instead reducing their stakes and reallocating capital to other AI stocks, including Amazon.
Amazon has a strong presence in three markets
Amazon has three key growth engines: e-commerce, digital advertising, and cloud computing. Specifically, Amazon operates the largest online marketplace in North America and Western Europe as measured by sales, but the company is still gaining market share. morgan stanley Analysts expect Amazon to outperform alibaba Lead the world in retail e-commerce sales by 2027.
The strength of its retail business has naturally led Amazon to dominate the retail advertising market, to the point where Amazon ranks as the world's third-largest ad tech company. alphabetGoogle and meta platform. But Amazon is gaining market share faster than Meta, and Google is actually losing ground, according to eMarketer.
Finally, Amazon Web Services (AWS) still dominates the cloud infrastructure and platform services market despite losing two points of market share to second place. microsoft Azure in the fourth quarter. That means Amazon is uniquely positioned to benefit as companies deploy cloud infrastructure to support their artificial intelligence (AI) projects.
Amazon is leveraging artificial intelligence to strengthen its market presence
Like many leaders, Amazon CEO Andy Jassy sees artificial intelligence, especially generative AI, as a transformative technology. “Generative AI has the potential to be the biggest technology transformation since the cloud (though the cloud itself is still in its infancy) and perhaps since the Internet,” he wrote in his latest letter to shareholders. .
Not surprisingly, Amazon is leveraging artificial intelligence to improve its competitiveness across its three major business segments.
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E-commerce: In February, Amazon debuted a generative AI shopping assistant called Rufus. Rufus was initially made available to some consumers in the US through the Amazon mobile app, but is now being rolled out to a wider audience. Think of Rufus as an assistant that answers your questions and makes recommendations based on the Amazon product catalog, customer reviews, and information from around the web. Additionally, Amazon uses machine learning models to optimize warehouse inventory and last-mile delivery, both of which streamline its logistics business.
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Digital advertising: Amazon recently introduced a generative AI tool that allows brands to create relevant and engaging lifestyle images featuring their products. This ultimately allows you to run more cost-effective advertising campaigns. Remarkably, 75% of media buyers struggling to create successful campaigns cite generating creative content as their biggest challenge. Amazon solves that problem with a new AI-powered image generator.
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Cloud computing: Amazon Web Services ranked third in generative AI market share last year behind OpenAI and Microsoft, but product development at every layer of the AI stack could help improve its position. At the infrastructure layer, custom chips for AI training and inference provide a cheaper alternative to his Nvidia GPUs. Bedrock is a platform layer that enables companies to build custom generative AI applications. Additionally, at the application layer, Amazon Q automates tasks for non-technical personnel and software developers.
Investors should monitor AWS closely. While Amazon is predicted to gain market share in e-commerce and digital advertising, Microsoft has quickly become a strong competitor in the cloud space thanks to its exclusive partnership with OpenAI.
Amazon is the best stock to buy right now
Straits Research says online retail sales will grow at 8% annually until 2030. Meanwhile, Grand View Research believes digital advertising and cloud computing revenue will grow at 15% and 14% annually, respectively. Finally, Bloomberg expects spending on generative AI to grow at 48% annually over the same period.
Taken together, Amazon can expect double-digit revenue growth through the end of the decade. In fact, Wall Street expects the company to grow revenue by 11% annually over the next five years. In that context, the current valuation of 3.3 times sales looks reasonable. Patient investors should not hesitate to take a small stake in Amazon starting today.
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Suzanne Frey, an Alphabet executive, is a member of the Motley Fool's board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. Trevor Jennewine has positions at his Amazon and his Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends his Alibaba Group and recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
Billionaires are selling Nvidia and buying this artificial intelligence (AI) stock instead Originally published by The Motley Fool
