Nvidia created a staggering amount of value for investors over the last 18 months. It was a $360 billion company at the beginning of 2023, and today its market capitalization stands at a whopping $3.2 trillion . That's a ninefold increase, and it's only natural to feel disappointed if you missed the run.
But it's important to keep looking forward, and watching what Wall Street's top investors are doing can be one way to find the next big opportunity. In the first quarter of 2024, billionaire fund managers piled into two artificial intelligence (AI) stocks that weren't Nvidia:
- Citadel Advisors, which is run by billionaire Ken Griffin, bought 352,453 shares of Amazon (NASDAQ: AMZN) . It represented a 5.6% increase to the fund's total position in Amazon, which is now worth almost $1.3 billion.
- Appaloosa Management, which is run by billionaire David Tepper, bought 975,000 shares of Oracle (NYSE: ORCL) . It represented a whopping 73% increase to the fund's original stake which it established at the end of 2023.
Both Amazon and Oracle have inserted themselves into the AI industry with a substantial amount of conviction. I'm not suggesting their respective stocks are about to stage an Nvidia-style rally, but here's why they could deliver strong returns for investors who buy them today.
1. Amazon: A multifaceted AI play
Amazon stock is up almost 30% this year, and the company was catapulted into the exclusive $2 trillion club just last month. Investors are bullish on the efficiency measures Amazon has adopted in its e-commerce segment to boost profits, but the company's growing presence in AI is also attracting lots of positive attention.
Amazon uses AI across all of its businesses. AI powers the recommendation engine on amazon.com, which drives sales by showing customers products they are likely to buy. The Prime Video streaming platform also uses AI during the NFL's Thursday Night Football programming. It autonomously compiles highlights for the viewer on demand, shows them advanced stats like the running speed of each player, and gives the viewer data-driven insights into the next potential play.
But the Amazon Web Services (AWS) cloud platform is home to the company's heavy-hitting AI projects. AWS designed its own data center chips, which can train AI models at 50% of the cost of Nvidia's industry-leading GPUs . Plus, the Amazon Bedrock platform offers AWS customers a library of pre-built large language models (LLMs), which they can use to accelerate the development of their own AI applications.
The tech giant recently invested $4 billion in leading AI start-up Anthropic. As part of the deal, Anthropic agreed to make AWS its primary cloud platform, and it will train its future models using Amazon's chips. Plus, it agreed to make those models available on Bedrock so AWS customers can use them to build their own apps. This partnership could entice aspiring developers to choose AWS over competing clouds like Microsoft Azure.
Amazon generates more revenue than every other company in the $2 trillion club, and yet it trades at the cheapest price-to-sales (P/S) valuation of the bunch . Plus, Wall Street thinks Amazon will deliver $4.18 in earnings per share this year, which would represent a whopping 44% growth compared to 2023.
AWS remains the company's most profitable segment, but its e-commerce business is benefiting from improvements to its fulfillment network that are driving down its cost-to-serve metric (the cost of fulfilling orders). Considering e-commerce remains Amazon's largest source of revenue, those shrinking costs could lead to sustained long-term growth in the entire organization's profitability.
Amazon stock might be trading near an all-time high right now, but I'm not surprised Citadel was a buyer recently because there could be plenty of upside in the tank.
2. Oracle: Industry-leading AI data center infrastructure
Tech giants (including Amazon) are racing to build more data centers to meet the surging demand for computing capacity from AI developers. Oracle operates some of the best AI infrastructure in the industry, which is cheaper and faster than the competition.
Oracle's Supercluster technology allows developers to scale up to 32,768 of Nvidia's GPUs , and that will soon increase to 65,536. More GPUs can translate to bigger AI models, which leads to more advanced capabilities in finished AI applications like chatbots and virtual assistants. For context, some of Amazon's best AI infrastructure offers clusters of just 20,000 GPUs, and even Meta Platforms ' latest data centers have clusters of around 24,000 GPUs.
Plus, Oracle's unique random direct memory access (RDMA) networking technology can move data between servers and devices much faster than traditional Ethernet networks. Since AI developers typically pay for computing capacity by the minute, faster processing can significantly drive down costs. Last year, Oracle CEO Larry Ellison said the company's latest Gen2 infrastructure can train AI models at twice the speed and for half the cost of competing data centers.
Oracle is building new data centers right now to meet demand from leading developers like OpenAI , Cohere, and Elon Musk 's xAI. In the recent fiscal 2024 fourth quarter (ended May 31), the company's remaining performance obligations (order backlog) surged 44% year over year to a record $98 billion. That included $12.5 billion in new AI deals from 30 different customers who are waiting for more capacity to come online.
Oracle's total revenue came in flat during Q4, but the Oracle Cloud Infrastructure (OCI) segment brought in $2 billion, which represented 42% growth. Given the size of the order backlog I mentioned above, that figure looks poised for substantial growth in the coming years.
Oracle stock is up 39% this year and it's trading at a record high, yet it's still cheap. It trades at a price-to-earnings (P/E) ratio of just 26, which is a 20% discount to the 32.7 P/E ratio of the Nasdaq-100 index. Oracle is also a whopping 65% cheaper than Nvidia right now, which trades at a P/E ratio of 76.
Therefore, investors who missed Nvidia's incredible run can still find value in the AI space through Oracle stock. It appears David Tepper and his team have spotted a bargain given how quickly Appaloosa is accumulating shares.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .
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