Billionaire investor Stanley Druckenmiller has 40% of his portfolio in 3 AI stocks. Are there any purchases?

By | March 17, 2024

Stanley Druckenmiller is one of the most successful investors of all time.

Druckenmiller, under George Soros, helped lead the strategy that “broke the Bank of England,” making them more than a billion dollars in 1992 by shorting the British pound, leading to the crash.

However, that trade was no fluke. After founding Duquesne Capital Management in 1981, Druckenmiller’s hedge fund never had a bad year, a period that included the Black Monday crash, the dot-com bust and the Great Financial Crisis. Duquesne Capital Management averaged an annual return of 30% between 1986 and 2010, crushing the broad market.

Druckenmiller closed his fund in 2010, but did not stop investing. Today, he heads the Duquesne Family Office, which has approximately $3.4 billion in assets, according to the fourth-quarter update. Recently, the famous investor has been an outspoken bully on AI stocks. Like a number of other CEOs and investors, the billionaire sees it as a major innovation. Last year he said: “AI could be as transformative as the internet.”

Not surprisingly, AI stocks make up a significant portion of his portfolio. In fact, just three AI stocks account for 40% of his holdings. Let’s take a look at those stocks and see if they’re worth buying today.

A trader holding his pen against a chart.A trader holding his pen against a chart.

Image source: Getty Images.

1. Nvidia

It may not be a surprise to see Nvidia (NASDAQ: NVDA) at the top of this list. Nvidia has dominated the AI ​​story and is the biggest gainer in terms of market cap, up more than $1.5 trillion since early 2023.

At the end of 2023, Druckenmiller owned 617,494 shares worth approximately $306 million and call options on the shares worth another $242 million. Combined, these holdings make up 16% of his portfolio. Considering Nvidia has soared since the start of the year, these options could have paid off well for the billionaire investor.

Druckenmiller started buying Nvidia in the fourth quarter of 2022, indicating he jumped into the stock after ChatGPT launched, marking the start of the AI ​​boom. The investor said in the fall that Nvidia stock was in “nosebleed territory,” but the shares continued to rise, and his fourth-quarter call purchase indicates he changed his mind based on that synopsis, though he has reduced its stake in Nvidia shares by 30%. in Q4. It’s unclear whether he has sold his Nvidia stock in the first quarter so far, but based on the current price, holding on to it would have been the right move.

2.Microsoft

After Nvidia, Microsoft (NASDAQ: MSFT) is perhaps the second best-known AI stock. The tech giant has been a close partner of ChatGPT parent company OpenAI and has invested billions in the AI ​​start-up, giving the company an edge in the new technology. It has integrated OpenAI features into its products, including Azure, GitHub, Bing and its Office suite, and it has designed its own ChatGPT-like Copilot to answer questions, improve communication and guide users.

Druckenmiller is not a newcomer to Microsoft. He first started buying the shares in 2015, and he increased his stake in the fourth quarter, buying 68,860 shares to bring the total to 1.09 million, or $408.4 million. Microsoft is his largest stock holding, representing 12% of his portfolio.

Notably, Druckenmiller dumped his entire stake in the company in the fourth quarter Alphabet, Microsoft’s rival, indicating a clear preference for Microsoft. That decision appears to be paying off, as Microsoft is up 10% this year, while Alphabet is down slightly.

3. Coupang

South Korean e-commerce leader Coupang (NYSE: CPNG) may not be an AI stock in the traditional sense, but the company is doing things with artificial intelligence that earn it a place in the category.

Coupang uses artificial intelligence in several ways, including fulfillment center robots that can carry more than 2,000 pounds and are called autonomous guided vehicles as they guide themselves through the warehouse. They have reduced the human workload by approximately 65%.

Coupang also uses AI to help warehouse workers, providing each employee with a personal digital assistant (PDA) that assigns work and optimizes routes using AI and machine learning.

Druckenmiller owned 22.9 million shares of Coupang at year-end, adding 2 million shares to his holdings in the fourth quarter, bringing his total holdings to $371 million, or 11% of his portfolio. He has owned the Korean e-commerce stocks since before they went public. It’s not entirely clear why Druckenmiller is betting on Coupang, but the stock currently offers attractive growth at a good price.

Which of these AI stocks are buys?

Of these three stocks, I think Nvidia and Microsoft look like solid buys. Yes, the shares are up significantly over the past year, but these companies are the respective leaders in their AI segments (Nvidia in hardware and Microsoft in software), and those leadership positions will likely pay off in the coming years.

Coupang also seems promising, but riskier. The company is achieving solid growth and trading at a reasonable valuation. However, long-term growth appears to depend on expanding beyond South Korea and into new markets, as the country has already made significant inroads into its home market. That could pay off for the company, especially since “development offerings” delivered 105% revenue growth to $273 million in the fourth quarter, but it’s a riskier strategy.

Overall, investors here are better off sticking with Nvidia and Microsoft. If you’re an AI investor, it makes sense to follow Druckenmiller’s comments and moves as the investment landscape evolves. The billionaire mentioned the Nvidia rally, and he may have some foresight into where the AI ​​boom will go next.

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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Coupang, Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.

Billionaire investor Stanley Druckenmiller has 40% of his portfolio in 3 AI stocks. Are there any purchases? was originally published by The Motley Fool

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