Several wealthy hedge fund managers sold Nvidia stock in the fourth quarter, while buying shares in the booming stocks of Palantir and Amazon.
For many investors, Nvidia is a classic artificial intelligence (AI) stock. The company's graphics processing units power many of the most advanced AI systems, and the company holds over 80% market share in its AI processors. So from a semiconductor perspective, Nvidia is almost single-handedly enabling the AI boom. This resulted in a 239% increase in the stock price in 2023.
Still, the hedge fund billionaires listed below sold their positions in Nvidia during the fourth quarter and simultaneously reallocated their funds throughout the company. Palantir Technologies (PLTR 1.94%) and Amazon (AMZN 3.20%)two hot AI stocks that have risen 191% and 77%, respectively, over the past year.
- Millennium Management's Israel Englander sold 1.7 million Nvidia shares in the fourth quarter, reducing his holdings by 45%. During that time, he increased his position in Palantir by his 1,100% and his Amazon stock by his 1%.
- Joel Greenblatt of Gotham Asset Management sold 13,480 shares of Nvidia stock in the 4th quarter, reducing his holdings by 16%. During that time, he increased his position in Palantir by 1,800% and his Amazon stake by 3%.
- Steven Cohen of Point72 Asset Management sold 1.1 million shares of Nvidia stock in the fourth quarter, reducing his holdings by 66%. During that time, he started a small position in Palantir and increased his stake in Amazon by 11%.
The three fund managers discussed above are S&P500 This gives investors additional incentive to consider recent purchases. Are Palantir and Amazon still worth buying?
1. Palantir Technologies
Palantir specializes in data analytics. Its software enables companies to capture and integrate data, develop and manage artificial intelligence and machine learning (ML) models, and build applications that incorporate those datasets and models. These applications help employees make better decisions, which, in theory, can lead to improved business outcomes. The company recently announced a new product called AIP (Artificial Intelligence Platform). It brings support for large-scale language models and generative AI to existing software.
Industry analysts praise Palantir's technology. for example, forrester research ranked Foundry Software as the best AI/ML platform on the market in a report published in July 2022. Similarly, Dresner Advisory Services ranked Palantir as a leader in the AI/ML and data science market in a report published in August 2023. At the same time, Dresdner acknowledged that the company is a leader in his ModelOps, an area focused on model lifecycle management.
Palantir reported encouraging financial results in the fourth quarter. The number of customers increased by 35%, and the amount spent by the average existing customer increased by 8%. As a result, revenue increased 20% to $608 million and non-GAAP (adjusted) net income doubled to $0.08 per diluted share. CEO Alex Karp said demand for AIP is a key growth driver. “AIP's momentum is contributing significantly to new revenue and new customers,” he said in his letter to shareholders. “The organic, unconstrained demand for that capability is unlike anything we've seen in the last 20 years.”
Going forward, Straits Research predicts that spending on big data analytics will grow at 14% annually until 2031. But Wall Street analysts expect Palantir to grow sales at 21% annually over the next five years. Based on this consensus estimate, the current valuation of 22.8 times sales appears relatively expensive. Personally, I won't buy this stock until that multiple drops. It's also worth noting that Palantir averaged 18.6 times sales in the fourth quarter, when Mr. Englander, Mr. Greenblatt and Mr. Cohen were buying shares. I'm more comfortable with that evaluation.
2. Amazon
Amazon has a strong presence in three markets. In e-commerce, we operate the largest online marketplace in North America and Western Europe by sales. In digital advertising, we are the largest retail media company in the United States and the third largest ad tech company in the world. Amazon has steadily increased its share in both markets in recent years, and is expected to continue increasing its share in the future.
In cloud computing, Amazon Web Services (AWS) accounted for 31% of cloud infrastructure and platform services (CIPS) spending in the first quarter, 6 points ahead of second place. microsoft Azul. In fact, AWS has lost 1 percentage point of market share over the past year. However, the company remains uniquely positioned when it comes to AI monetization given its leadership in the CIPS market.
Additionally, AWS has the potential to regain lost market share with the help of its AI products Amazon Bedrock and Amazon Q. Bedrock is a cloud service that allows companies to customize large-scale language models and build bespoke generative AI applications. Amazon Q is a conversational assistant that uses generative AI to answer your questions and automate your coding projects. During the Q1 earnings call, CEO Andy Jassy shared the following information: “Q is not only the most capable AI-powered assistant for software development and data, but also the performance standard. Q also has the highest known score and code proposal acceptance rate that outperforms other publicly benchmarkable competitors in discovering security vulnerabilities by connecting multiple steps. We lead all software development assistants in applying automated actions.”
Amazon beat Wall Street expectations in its first-quarter financial report. Revenue increased 13% to $143 billion, with growth accelerating across advertising services, cloud services, and online stores. Meanwhile, GAAP net income more than tripled to $0.98 per diluted share as the company continued to manage costs.
Retail e-commerce sales are expected to grow at 8% per year through 2030, while the digital advertising and cloud computing markets are expected to expand at 15% and 14% per year, respectively. This allows Amazon to aim for double-digit sales growth for him. In fact, Wall Street expects the company to grow revenue by 11% annually over the next five years.
The company's stock currently trades at 3.2 times sales, a reasonable valuation compared to analysts' consensus sales growth forecasts. Personally, I don't mind buying the stock at that valuation. But investors should know that Amazon's sales averaged 2.6 times sales in the fourth quarter, when the aforementioned billionaire fund managers were buying the stock.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Trevor Jennewine works at Amazon, Nvidia, and Palantir Technologies. The Motley Fool has positions in and recommends Amazon, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: His January 2026 $395 long call on Microsoft and his January 2026 $405 short call on Microsoft. The Motley Fool has a disclosure policy.