Forget Nvidia: Prominent Billionaires Are Dumping It in Favor of These 3 Supercharged Artificial Intelligence (AI) Stocks

Since the start of 2023, no trend has been hotter on Wall Street than the arrival of artificial intelligence (AI) .

With AI, software and systems are used in place of humans to oversee or undertake assigned tasks. The seemingly limitless ceiling attached to the AI revolution traces back to the ability of software and systems to learn without human intervention and evolve over time. The capacity to become more proficient at tasks, or perhaps learn new skills entirely, gives this technology utility in almost every sector and industry of the global economy.

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Although AI is rivaling the internet in terms of game-changing potential for corporate America, optimism isn't universal among Wall Street's brightest (and richest) investors.

Based on Form 13F filings with the Securities and Exchange Commission from the March-ended quarter -- a 13F allows investors to see what top money managers have been buying and selling -- more than a half-dozen prominent billionaires were sellers of Wall Street's AI darling Nvidia (NASDAQ: NVDA) . At the same time, these select billionaire investors were piling into three other hypergrowth AI stocks.

Eight billionaire investors meaningfully pared down their stakes in Nvidia

In short order, Nvidia has become the go-to supplier of AI-graphics processing units (GPUs) used in enterprise data centers. The semiconductor analysts at TechInsights estimate that Nvidia was responsible for all but 90,000 of the 3.85 million GPUs shipped to enterprise data centers in 2023 .

But despite having a monopoly on the hardware powering split-second decision-making in AI-accelerated data centers, eight billionaire money managers -- nine, if you include the recently passed Jim Simons of Renaissance Technologies -- were sellers of Nvidia stock during the first quarter, including (total shares sold in parenthesis adjusted for Nvidia's 10-for-1 stock split in June ):

• Philippe Laffont of Coatue Management (29,370,600 shares)
• Ken Griffin of Citadel Advisors (24,627,160 shares)
• Israel Englander of Millennium Management (7,200,040 shares)
• Stanley Druckenmiller of Duquesne Family Office (4,415,510 shares)
• David Siegel and John Overdeck of Two Sigma Investments (4,208,010 shares)
• David Tepper of Appaloosa (3,480,000 shares)
• Steven Cohen of Point72 Asset Management (3,045,050 shares)

While profit-taking might explain some of this selling, history is a potentially bigger concern . All eight of these billionaires have watched for decades as next-big-thing innovations were highly touted, but ultimately failed to deliver early in their existence. Investors have a tendency to overestimate how quickly a new technology will be adopted by consumers and businesses. If this trend persists, it's a matter of when , not if , the AI bubble bursts.

Competitive pressures are going to begin weighing on Nvidia, too. Even if it holds onto its compute advantage, which appears likely with the rollout of its next-generation GPU platform (known as Blackwell) on deck, Nvidia's inability to meet all enterprise demand opens the door for cheaper alternatives to thrive.

I'll also quickly mention that Nvidia's four biggest customers by net sales are developing AI chips of their own. Even if this is just complementary hardware, it's reducing data center "real estate" for Wall Street's AI darling .

But while these billionaires were actively selling shares of Nvidia during the March-ended quarter, some were piling into three supercharged AI stocks instead.

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Palantir Technologies

The first high-octane AI stock that select billionaire investors were busy buying as they were paring down their stakes in Nvidia is data-mining specialist Palantir Technologies (NYSE: PLTR) . Altogether, five Nvidia sellers were Palantir stock buyers , including (total shares purchased in parenthesis):

• David Siegel and John Overdeck of Two Sigma Investments (3,216,525 shares)
• Philippe Laffont of Coatue Management (1,368,832 shares)
• Stanley Druckenmiller of Duquesne Family Office (769,965 shares)
• Israel Englander of Millennium Management (481,634 shares)

The primary draw for investors to Palantir is that its services are unique at scale . While other companies may offer bits and pieces of the services Palantir provides, no large companies are anywhere close to matching its scope of services. Having a moat and being unique are traits that Wall Street and investors tend to reward with a hearty valuation premium.

For years, the company's AI-driven Gotham platform has been responsible for much of its growth. Gotham caters to government entities and helps with everything from data collection to mission planning. This segment typically lands multiyear contracts, which is what leads to predictable and somewhat sustainable double-digit growth.

However, Gotham has a natural ceiling. This is to say that Palantir isn't going to allow certain governments to use its platform (e.g., China and Russia). Thus, Palantir Technologies' long-term growth opportunity lies with its rapidly growing, but still rough around the edges, Foundry platform.

Foundry is a business-focused platform incorporating AI, machine learning, and optimization models that help businesses make sense of copious amounts of data in order to streamline their operations. Sustained double-digit sales growth should be relatively easy for Foundry throughout the decade.

Amazon

A second hypergrowth AI stock top-notch billionaires were active buyers of in the first quarter is e-commerce leader Amazon (NASDAQ: AMZN) . Two of Nvidia's biggest sellers were some of Amazon's prominent buyers (total shares purchased in parenthesis):

• Israel Englander of Millennium Management (2,390,755 shares)
• Philippe Laffont of Coatue Management (241,514 shares)

Although most people are familiar with Amazon because of its globally leading online marketplace, e-commerce generates minimal operating income and razor-thin margins for the company. What attracts billionaires like Englander and Laffont to Amazon is its considerably faster-growing ancillary operating segments.

Cloud infrastructure service platform Amazon Web Services (AWS) is, unquestionably, the most important puzzle piece . As of the end of 2023, AWS held almost a third of global cloud infrastructure service market share, which is an enviable position to be in considering that enterprise spending on cloud services is still in its early stages of ramping up. Amazon is looking to incorporate generative AI solutions within AWS to gives its customers the ability to handle a variety of tasks, ranging from text summarization to image generation.

While AWS has, traditionally, accounted for 50% to 100% of Amazon's operating income, subscription services (e.g., Prime) and advertising services are generating sustained double-digit growth, as well. In particular, it's been more than two years since Amazon's advertising services segment delivered less than 20% year-over-year sales growth. This is the advantage of luring more than 3 billion visits to its site each month.

Following a post-earnings release sell-off, shares of Amazon are historically cheap , relative to Wall Street's consensus cash flow estimates for the company in 2025.

CrowdStrike Holdings

The third supercharged artificial intelligence stock successful billionaire investors were purchasing as they were sending shares of Nvidia to the chopping block is cybersecurity goliath CrowdStrike Holdings (NASDAQ: CRWD) . The four billionaires that were making this swap include (total shares purchased in parenthesis):

• Ken Griffin of Citadel Advisors (706,283 shares)
• Israel Englander of Millennium Management (297,097 shares)
• David Siegel and John Overdeck of Two Sigma Investments (154,688 shares)

With hindsight being 20/20, selling Nvidia to buy CrowdStrike isn't looking all too smart at the moment. CrowdStrike is reeling from the repercussions of a cybersecurity update it released three weeks ago , which shut down various networks for airlines, financial firms, and tech companies. Though this issue had nothing to do with a cyberattack, CrowdStrike might face a laundry list of litigation in the months to come as businesses hurt by the outage seek damages.

What makes this situation so interesting is that, up to this point, CrowdStrike's cloud-native, AI-driven Falcon security platform has been superior to its peers . Falcon oversees trillions of events each week, and has used each of these events to grow smarter and more effective at spotting and responding to potential end-user threats.

Even though CrowdStrike's security platforms are far from the cheapest, its consistent gross retention of around 98% suggests businesses are willing to pay a premium for its services.

Furthermore, CrowdStrike has had success getting its existing clients to add on new services. Just shy of two-thirds of its clients had adopted five or more cloud-modules as of the end of the fiscal first quarter (April 30, 2024).

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Sean Williams has positions in Amazon. The Motley Fool has positions in and recommends Amazon, CrowdStrike, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy .