While major market indices are near new highs, some of the world’s most prominent billionaire investors continue to favor established industry leaders involved in artificial intelligence (AI).
Chase Coleman’s net worth is estimated at over $5 billion, according to Forbes. His company Tiger Global Management continues to hold a stake in NVIDIA (NASDAQ: NVDA)the leading AI chip provider that has delivered a 447% return to shareholders over the past 18 months.
Andreas Halvorsen is CEO of Viking Global Investors and has an estimated net worth of more than $7 billion. The company manages a multi-billion dollar equity portfolio and its largest investment in the second quarter was Amazon (NASDAQ:AMZN).
These stocks are showing weakness after their recent earnings results, but their lower share prices could lead to further gains in 2025. Here’s why.
1. Nvidia
Chase Coleman’s company disclosed a stock portfolio valued at over $21 billion at the end of the second quarter. The sixth-largest position in the portfolio was leading AI chip supplier Nvidia, with a stake valued at $1.1 billion.
Nvidia shares recently fell from their highs following the release of its latest earnings results. The company posted another strong quarter with revenue up 122% year over year, but the stock’s runup over the past year has investors looking for better near-term growth forecasts.
Nvidia is gearing up to launch its next-generation Blackwell graphics processing unit (GPU). Management expects the chip to generate billions in revenue in the fiscal fourth quarter, but next quarter’s forecast calls for revenue of about $32.5 billion. While that represents an impressive increase of about 80% year-over-year, Wall Street analysts were expecting more.
While Nvidia’s near-term guidance wasn’t as strong as investors would have liked, it’s a positive sign that the company continues to see strong demand for its current generation of GPUs, while the upcoming Blackwell chip should drive strong sales next year.
Since the stock is in the red, investors have a great opportunity to buy shares at a better price. The stock is now trading at a price-to-earnings ratio (P/E) of 27, which is an average valuation for the S&P500 Index. The recent decline in the stock could be the reason for a further rise next year.
Looking ahead to 2025, the biggest risk to Nvidia’s momentum would be a slowdown in spending across the data center market, but Tiger Global seems to see more upside in the stock. The company held on to its position and did not sell any shares in the second quarter.
In its recent quarterly earnings call, Nvidia said demand for its H200 and Blackwell GPUs is already outpacing supply, suggesting another year of strong growth that could drive the stock to new highs next year.
2. Amazon
Andreas Halvorsen’s Viking Global Investors announced a stock portfolio worth more than $26 billion at the end of the second quarter. The largest holding was Amazon, with a stake worth $1.7 billion.
Amazon shares are down for similar reasons to Nvidia. The stock was higher going into its second-quarter earnings report, meaning investors had high expectations for the company’s prospects. Amazon continued to report significant increases in operating profit and accelerating cloud services revenue growth, but its third-quarter guidance came in lower than expected.
Amazon expects third-quarter operating profit to be between $11.5 billion and $15 billion, which is no improvement from the previous quarter’s operating profit of $14.7 billion. However, executives said during the conference call that they still see “a number of opportunities to further reduce costs,” pointing to more profitable growth in the future.
Amazon typically faces operating profit headwinds during Prime Day deals when retail prices are discounted, but the company continues to invest in areas that should lead to further margin improvements in the retail business over the long term, such as automation and robotics, expanding same-day delivery capabilities and further optimizing warehousing at regional facilities.
Amazon is also increasing its investments in generative AI and cloud computing infrastructure to support the growth of Amazon Web Services. Most global IT spending is still done locally, giving Amazon’s most profitable business a long growth perspective.
It’s worth buying the shares when they’re falling. The stock is trading at a fair P/E of 30 based on 2025 earnings estimates. Analysts expect Amazon’s earnings to grow 23% per year over the next few years. Assuming the stock continues to trade at the same P/E, it should be worth significantly more in another five years.
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John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. John Ballard holds positions in Nvidia. The Motley Fool holds positions in Amazon and Nvidia and recommends these companies. The Motley Fool has a disclosure policy.
These Billionaires Bet on These AI Stocks, But Should You Buy Them? was originally published by The Motley Fool
