Investors are rarely at a loss for important data releases on Wall Street. Monthly economic reports highlighting jobs data and the prevailing rate of inflation, coupled with roughly six weeks crammed full of earnings reports from thousands of publicly traded companies, have the potential to overwhelm investors and allow key announcements to slide under the radar.
In mid-August, one of these important announcements may have gone unnoticed.
On Aug. 14, institutional investors with at least $100 million in assets under management filed Form 13F with the Securities and Exchange Commission. A 13F provides a concise, under-the-hood look at what Wall Street's smartest money managers purchased and sold in the latest quarter (in this instance, the June-ended quarter). In other words, 13Fs clue investors into which stocks, industries, sectors, and trends have been piquing the interest of Wall Street's top asset managers.
Image source: Getty Images.
The second quarter was a particularly active period for billionaire money managers. Although artificial intelligence (AI) has been making waves on Wall Street, billionaire investors were clear sellers of AI darling Nvidia (NASDAQ: NVDA) , and big-time buyers of two other trillion-dollar stocks.
Billionaire money managers gave Nvidia the boot for a third consecutive quarter
Selling shares of Nvidia is nothing new for Wall Street's brightest and richest investors. The latest quarter marked the third straight quarter that more than a half-dozen prominent billionaire investors had reduced their stakes in Wall Street's leading AI stock. The seven billionaire sellers in the second quarter include (total shares sold in parenthesis):
- Ken Griffin of Citadel Advisors (9,282,018 shares)
- David Tepper of Appaloosa (3,730,000 shares)
- Stanley Druckenmiller of Duquesne Family Office (1,545,370 shares)
- Cliff Asness of AQR Capital Management (1,360,215 shares)
- Israel Englander of Millennium Management (676,242 shares)
- Steven Cohen of Point72 Asset Management (409,042 shares)
- Philippe Laffont of Coatue Management (96,963 shares)
With shares of Nvidia skyrocketing 715% since the start of 2023 , as of he closing bell on Sept. 13, 2024, profit-taking is certainly a viable reason for billionaires to be reducing their stakes in the AI kingpin. But there may be much more to this precipitous selling activity than just simple profit-taking.
For instance, history has been brutally unkind to next-big-thing innovations and technologies over the last three decades. Although large addressable markets tend to excite investors, no game-changing innovation has escaped an early stage bubble in 30 years.
Investors have a tendency to overestimate the adoption and/or utility of next-big-thing technologies and innovations, which eventually leads to real-world growth forecasts failing to meet otherworldly expectations. The simple fact that most businesses lack a genuine game plan to generate a positive return on their AI investments is a pretty clear warning that an artificial intelligence bubble is likely brewing.
External and internal competition are going to be challenging for Nvidia , as well. In addition to rival chipmakers bringing AI-graphics processing units (GPUs) to market, all four of Nvidia's top customers by net sales are developing AI-GPUs of their own. This should result in Nvidia's hardware losing out on valuable data center "real estate" in the future.
Last but not least, the company's insiders have been big-time sellers . The last time a member of management or the board purchased shares of their company on the open market was December 2020.
But while billionaire investors were casting aside shares of Nvidia during the second quarter, they were busy buyers of two other trillion-dollar stocks.
Image source: Amazon.
Amazon
The first trillion-dollar company and " Magnificent Seven " member that billionaires fancied instead of Nvidia in the June-ended quarter is e-commerce goliath Amazon (NASDAQ: AMZN) . The five billionaire asset managers who bought shares of Amazon include (total shares purchased in parenthesis):
- Ole Andreas Halvorsen of Viking Global Investors (2,391,262 shares)
- Ray Dalio of Bridgewater Associates (1,597,676 shares)
- Ken Fisher of Fisher Asset Management (1,214,055 shares)
- Ken Griffin of Citadel Advisors (1,114,948 shares)
- Philippe Laffont of Coatue Management (702,235 shares)
Though Amazon's consumer-facing online marketplace is how most people become familiar with the company, online retail sales account for very little of Amazon's operating cash flow and net income. At the moment, the lion's share of its operating income can be traced to its globally leading cloud infrastructure service platform , Amazon Web Services (AWS).
Sales growth for AWS reaccelerated in the second quarter to 19% from the prior-year period, but has consistently remained in the double digits. With businesses still very early in their cloud-spending cycle, and AWS controlling an estimated 33% of the global cloud infrastructure service market, per Canalys, this operating segment should remain Amazon's cash cow moving forward.
Amazon is also generating plenty of cash flow and double-digit sales growth from its two other ancillary operating segments: advertising services and subscription services. The former is benefiting from the exceptional ad-pricing power that comes with attracting north of 3 billion visits each month.
Meanwhile, subscription services (e.g., Prime) should thrive on the heels of an expansive content library . Amazon has become the exclusive home of Thursday Night Football and recently signed an 11-year streaming rights deal with the National Basketball Association (NBA). When coupled with the value Prime provides to its online marketplace consumers (e.g., free two-day shipping on most items), it's readily apparent that Amazon possess meaningful pricing power with Prime.
Based on traditional fundamental metrics, such as the price-to-earnings (P/E) ratio , Amazon is far from cheap. But relative to consensus cash flow estimates for 2025 -- cash flow is a better measure of value for Amazon since it aggressively reinvests back into its business -- Amazon is valued well below the cash flow multiples it traded at throughout the 2010s.
Microsoft
The other trillion-dollar stock that Form 13Fs show billionaire investors have been favoring over Nvidia is software colossus Microsoft (NASDAQ: MSFT) . A total of eight billionaire fund managers purchased shares of Microsoft in the second quarter, including (total shares purchased in parenthesis):
- Ken Fisher of Fisher Asset Management (1,340,392 shares)
- Ole Andreas Halvorsen of Viking Global Investors (695,444 shares)
- Ray Dalio of Bridgewater Associates (510,822 shares)
- Israel Englander of Millennium Management (240,624 shares)
- John Overdeck and David Siegel of Two Sigma Investments (177,726 shares)
- Stephen Mandel of Lone Pine Capital (90,287 shares)
- Philippe Laffont of Coatue Management (20,684 shares)
The primary buzz around Wall Street's second-largest publicly traded company by market cap is its artificial intelligence ties. Microsoft is a major investor in OpenAI , the company behind popular chatbot ChatGPT, and has worked with OpenAI to incorporate AI solutions into its Bing search engine and Edge web browser.
Additionally, Azure is the world's No. 2 cloud infrastructure service platform. Microsoft is actively incorporating generative AI solutions and large language model capabilities into Azure to accelerate growth and make its platform more useful to enterprise clients. AI is very much at the heart of Microsoft's long-tail growth strategy.
But as I alluded earlier, there are signs that an early innings AI bubble is brewing. The good news for Microsoft is that it has its legacy segments to lean on .
While Windows and Office are no longer the growth stories they were 20 years ago, Windows remains the dominant operating system on computers worldwide. In other words, Microsoft can count on predictable operating cash flow from these legacy segments in pretty much any economic climate.
What's more, Microsoft is sitting on a mountain of cash . Even after purchasing gaming company Activision Blizzard for $68.7 billion last year, it closed out June with $75.5 billion in cash, cash equivalents, and short-term investments. In fact, Microsoft has generated more than $118 billion in operating cash flow over the trailing-12-month period. This cash affords Microsoft the ability to make acquisitions in order to rapidly expand its ecosystem of products and services.
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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, Microsoft, and Nvidia. 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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