In this article, we will take a detailed look at the Billionaire Stanley Druckenmiller is Buying and Selling These 10 AI Stocks.
Stanley Druckenmiller is one of the few billionaires who have been bullish on the AI megatrends right from the start. But that doesn’t mean he’d buy just anything AI the market is buying. After making huge profits from his bullish bet on Jensen Huang’s AI chips empire, he started cashing out of the company in the first quarter and by the end of the June quarter, his stake in the company was left at just over 200,000 shares.
Back in May, Druckenmiller explained why he’s selling the hottest AI stock, saying he’s had a “hell of a run” and he now “just needs a break.”
However, the billionaire said at the time that AI remains underhyped in the long term. Stanley Druckenmiller compared the internet revolution with the current AI boom, saying AI could “rhythm” with the internet and the real payoffs will come 4-5 years from now on. The Duquesne Capital founder, who closed his fund for outside investors and turned it into a family officer in 2011, said that the “incremental payoff” of AI investments is coming by the “day.”
During the second quarter, Druckenmiller shook up his portfolio to buy and sell several famous as well as under-the-radar AI stocks. In this article, we will take a look at some of those.
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10. Palantir Technologies Inc (NYSE:PLTR)
Billionaire Stanley Druckenmiller’s Stake Value: $19,503,000 (No Change in Stake From the First Quarter)
Palantir Technologies’ Inc (NYSE:PLTR) stunning growth posted in the second-quarter results and long-term trends show it’s a promising AI software stock. During the June quarter, overall revenue rose 27% year over year while US commercial revenue grew by a whopping 55%.
What makes Palantir Technologies Inc (NYSE:PLTR) one of the top AI stocks? Its technologies are actually solving the problems of businesses. Palantir’s data technology Ontology is solving the famous hallucination problem for AI systems, thanks to the company’s years of experience with military and defense systems. Earlier this year at an event with customers, Palantir Technologies Inc (NYSE:PLTR) shared some specifics on how its customers are being able to reduce costs and increase profits due to its artificial intelligence platform (AIP) that was launched about a year ago.
Airbus accelerated A350 production by 33%, BP reduced costs per barrel by 60%, and Jacobs Connect cut power usage by 30%. Panasonic decreased waste by 12%, ESI Group sped up ERP harmonization by 70%, and PG&E reduced transformer ignitions by 65%. Eaton boosted productivity by 25%, while Tyson Foods achieved $200 million in cost savings.
Carillon Scout Mid Cap Fund stated the following regarding Palantir Technologies Inc. (NYSE:PLTR) in its first quarter 2024 investor letter:
“The top contributor to return for the quarter was Palantir Technologies Inc. (NYSE:PLTR). Sentiment improved on Palantir after it reported stronger than expected commercial customer revenue and free cash flow. U.S. commercial growth was especially encouraging, as U.S. commercial revenue was up by a large percentage year over year for the fourth quarter and U.S. commercial customer count grew nearly as much. We expect Palantir to become one of the premier artificial intelligence (AI) software providers, built on its Foundry and AIP platforms.”
9. Coherent Corp (NYSE:COHR)
Billionaire Stanley Druckenmiller’s Stake Value: $260,098,000 (+43% From the First Quarter)
Coherent Corp (NYSE:COHR) is trending as investors pay attention to this relatively new entrant in the list of popular AI semiconductor stocks. The company recently posted strong quarterly results and gave an upbeat guidance. Earlier this month, BofA upgraded the stock to Buy from Neutral citing potential for improved execution and AI optical market growth. BofA also increased its price target for the stock to $75 from $65.
Coherent Corp (NYSE:COHR) makes optical materials and semiconductors. Its laser tech is used for laser welding for EV batteries and for UV lasers in mobile and high-end TV display industries. However, the spotlight is currently on its Communications segment, which is set to benefit from the expansion of cloud computing, AI, and machine learning. This segment, driven by the demand for datacom transceivers that handle higher data throughput, accounted for 52% of Coherent Corp (NYSE:COHR) recent market and grew by double digits year-over-year, particularly in North America and China.
Giverny Capital Asset Management stated the following regarding Coherent Corp. (NYSE:COHR) in its Q2 2024 investor letter:
“Because I like the portfolio, we had very few transactions during the quarter. I exited Coherent Corp. (NYSE:COHR) as I came to believe the company has an exceptional collection of assets but a much less impressive management culture. The CEO and CFO of Coherent both left their jobs recently, and perhaps I should have given their replacements time to set a new course. I used the proceeds from the sale to add to Five Below and Kinsale Capital. In the short run, Coherent is up and Five Below is down, so the early returns on this swap are not encouraging.”
8. Arista Networks Inc (NYSE:ANET)
Billionaire Stanley Druckenmiller’s Stake Value: $18,321,000 (-88% From the First Quarter)
Citi analyst Atif Malik increased his price target on the stock to $385 from $330. The analyst thinks while InfiniBand (a computer networking standard where NVDA has an edge) can take a major chunk of the AI networking market, Ethernet (Arista’s strength) is clearly gaining share. The analyst also said the AI back-end switching total addressable market could reach $15 billion by 2027, up from $10 billion. Based on these catalysts, the analyst increased his earnings estimates for Arista Networks Inc (NYSE:ANET) for 2024, 2025 and 2026 by 4%, 16% and 13%, respectively.
What makes Arista a promising AI stock?
Arista Networks Inc (NYSE:ANET) is set to gain amid the AI-driven shift to high-speed networks due to its open Ethernet design and unified Arista EOS. The company’s partnership with Broadcom also created an opportunity for Arista Networks Inc (NYSE:ANET) to expand its integrated software and hardware solutions.
Arista Networks Inc (NYSE:ANET) claims its Ethernet architecture based on merchant silicon allows fast deployment for major hyperscalers and Tier-2 cloud providers.
During Q1 earnings call, Arista Networks Inc (NYSE:ANET) management said it targets $750 million in AI revenue by 2025.
Ethernet at scale is becoming the de facto network and premier choice for scale-out AI training workloads. A good AI network needs a good data strategy delivered by a highly differentiated EOS and network data lake architecture. We are therefore becoming increasingly constructive about achieving our AI target of 750 million in 2025. In summary, as we continue to set the direction of Arista 2.0 networking, our visibility to new AI and cloud projects is improving, and our enterprise and provider activity continues to progress well.
Read the full earnings call transcript here.
Despite Nvidia’s integrated Ethernet approach with Spectrum-X, Arista Networks Inc (NYSE:ANET) is confident about its scalable AI solutions using Jericho-based platforms, which could drive broader market adoption. Arista Networks Inc (NYSE:ANET) EOS offers a unified interface for various network applications, making it a reliable choice for cloud providers.
Arista Networks Inc (NYSE:ANET) does not see Nvidia as a direct competitor in the Ethernet space yet. Playing on its strengths instead of competing against a giant gives it a strong position in the market.
Madison Mid Cap Fund stated the following regarding Arista Networks, Inc. (NYSE:ANET) in its Q2 2024 investor letter:
“We trimmed our positions in Arista Networks, Inc. (NYSE:ANET) and Carlisle Companies. Both of these companies have witnessed strong multi-year growth in their stock prices, which have resulted in elevated valuations. While we remain confident in the long-term prospects of both of these businesses, we trimmed our holdings to more appropriate position sizes given the risk/reward offered.”
7. Palo Alto Networks Inc (NASDAQ:PANW)
Billionaire Stanley Druckenmiller’s Stake Value: $30,161,000 (-36% from the First Quarter)
Strong demand in the cybersecurity industry is boosting Palo Alto Networks Inc (NASDAQ:PANW). Recently, Baird analysts Shrenik Kothari and Zachary Schneider said customers are focused on ROI and increased spending in the industry is benefitting Palo Alto Networks Inc (NASDAQ:PANW).
“PANW has seen this focus on ROI for some time now. Discounts are offered for larger deals rather than smaller ones to help lock in customers and maximize lifetime value. While still early days, initial customer response to new SASE 3.0 capabilities and AI features has been positive,” the analysts said.
They maintained an Outperform rating on the stock and upped their price target to $360 from $340.
DA Davidson also started covering the stock with a Buy rating and added it to its ‘Best of Breed Bison’ category of stocks.
DA Davidson’s Rudy Kessinger thinks Palo Alto Networks Inc’s (NASDAQ:PANW) three platforms will result in vendor consolidation which would be better than other companies. They believe Palo Alto Networks Inc (NASDAQ:PANW) has so far captured only 7% of the market which could reach a whopping $200 billion.
Palo Alto Networks Inc’s (NASDAQ:PANW) biggest strength is its Prisma Secure Access Service Edge (SASE) product, which generated about 50% growth in the fiscal third quarter year over year. Another growth catalyst for Palo Alto Networks Inc (NASDAQ:PANW) is Thunderdome Defense Information System Agency’s zero-trust network architecture.
ClearBridge Large Cap Growth Strategy stated the following regarding Palo Alto Networks, Inc. (NASDAQ:PANW) in its first quarter 2024 investor letter:
“Given our view that the overall market looks expensive, mostly due to mega cap valuations, the low likelihood that technology can continue to deliver well above market returns and an expected slowdown in economic growth, risk management has guided our recent positioning activity. We have been consistently trimming from the select bucket and redeploying into undervalued stable and cyclical names, while also being cognizant of position sizing to maintain the latitude to add to names when prices become attractive.
During the first quarter, we continued to trim IT stocks into strength to manage risk while also adding to high-conviction positions. For example, we trimmed our active weight in Palo Alto Networks, Inc. (NASDAQ:PANW) after the information security software maker lowered its guidance in part due to a new emphasis on providing short-term discounts on product bundles to pursue its consolidation opportunity more aggressively. While this strategy should position the company more strongly in the future, it potentially increases volatility in operating results in the near-to-medium term.”
6. Vistra Corp (NYSE:VST)
Billionaire Stanley Druckenmiller’s Stake Value: $225,717,000 (No Change from the First Quarter)
Vistra Corp (NYSE:VST) is a power generation company that is also involved in electricity generation and wholesale energy purchases and sales. Vistra Corp (NYSE:VST) has about 5 million customers and operates a 41,000-megawatt portfolio of natural gas, coal, nuclear, and solar assets, as well as battery storage facilities.
Citi recently published a list of utility stocks that it’s bullish on amid the importance of power grids, growth in renewable energy and AI-powered demand. Vistra Corp (NYSE:VST) is one of the stocks Citi likes.
Guggenheim analyst Shahriar Pourreza who holds a Buy recommendation and a Street-high price target of $133 on Vistra Corp (NYSE:VST) thinks VST is a “unicorn” for its portfolio of both gas and nuclear power plants. Pourreza further said in his note to clients that data centers are exploring 24-hour power sources that are clean and “nuclear plants are a very strong avenue for that”, further adding to his thesis for the stock.
Legacy Ridge Capital stated the following regarding Vistra Corp. (NYSE:VST) in its Q2 2024 investor letter:
“One of the sectors we know well which had been out of favor for several years has quickly come into favor: Independent Power Producers (IPPs). We’ve written consistently about NRG and Vistra Corp. (NYSE:VST) since the 2019 letter, have owned each, or both, since 2018, and invested a meaningful amount of our assets in VST specifically the past few years. Nate and I intend on spending more time in the year-end letter on our updated views on the IPPs and our learnings from the on-going investment, but we were a bit surprised how quickly the narrative around these companies changed. Our Blue Sky 2030 estimates of intrinsic value converged with the share price 6-years before we thought probable. In the 2019 letter, with respect to VST, we wrote:
“Over the next decade management should have close to $15 Billion to deploy to share repurchases. If you assume they have to pay an average price for the stock that’s higher than the current one, and they can only repurchase 60% of shares outstanding instead of the 100% the math implies, FCF per share in 2030 would be $14. That’s a $70 stock at today’s valuation, but a $140 stock at a more reasonable FCF yield of 10%.” And… “The IPPs are un-investable for most money managers, so there we are. When they become investable we’ll probably be long gone.”
We’re not exactly long gone, but sentiment has certainly surpassed investable. After 5+ years of VST trading between $17 – $26 a share—and $26 exactly a year ago—it hit a high of $107 in May on the heels of the Artificial Intelligence (AI) narrative and the implications for electricity demand. While we agree with the prevailing consensus view that more Data Centers will be built, Data Centers require base load energy, and that the US will probably be short base load energy, predicting the rate of any technological advancement is not our area of expertise, and we feel the margin of safety has dissipated. Therefore, what had been our largest position entering 2023 and 2024, and has been our greatest contributor to performance, is now one of the smaller positions in the fund.”
5. Adobe Inc (NASDAQ:ADBE)
Billionaire Stanley Druckenmiller’s Stake Value: $20,380,000 (New Stake)
Adobe has crushed all market fears around generative AI potentially denting the demand for company products. Some believed the rise of generative AI tools would dampen the demand for Adobe’s tools since everyone can now just give simple text-based commands to AI to make images and edit videos. But Adobe turned the tables around and used AI to its advantage. Adobe Inc (NASDAQ:ADBE) Digital Experience segment is integrating AI tools to enhance its tools and deliver AI-driven features for automation and personalization, catering to marketers, advertisers, ad agencies, publishers, and business executives. Through Adobe Experience Cloud, it offers solutions for B2B marketing and content creation.
A new addition to this segment is Adobe GenStudio, a generative AI product designed for marketing. It creates AI-generated images and supports content planning and management. Despite its content creation features, Adobe Inc (NASDAQ:ADBE) classified GenStudio under Digital Experience due to its primary focus on marketing applications.
After the Q2 results more Wall Street analysts think Adobe is in a position to use the generative AI revolution to its advantage. For the third quarter, the company expects $5.38 billion in revenue for Q3, marking a 12.1% year-over-year growth and signaling sequential acceleration.
Growth at Adobe Inc (NASDAQ:ADBE) is aided by AI products like Firefly, which has not only attracted new users but also boosted retention rates.
JPMorgan has upgraded Adobe Inc (NASDAQ:ADBE) to Overweight from Neutral and raised its price target to $580 from $570. Analysts believe the stock has significant upside potential and is poised to recover to its previous highs, potentially outperforming the broader market. They think current investor concerns, particularly around the Firefly product, might be overblown, and that monetization could start to improve in the latter half of this year and into the next.
Polen Global Growth Strategy stated the following regarding Adobe Inc. (NASDAQ:ADBE) in its Q2 2024 investor letter:
“With Adobe Inc. (NASDAQ:ADBE), in some ways, we see it as a microcosm of the market’s “shoot first, ask questions later” approach to categorizing AI winners and losers. In the early part of last year, Adobe came under pressure with a perception that generative AI (GenAI) would represent a material headwind to their suite of creative offerings. In short order, the company introduced its GenAI offering, Firefly, which shifted the narrative to Adobe as a beneficiary with a real opportunity to monetize GenAI in the near term. Earlier this year, that narrative was again challenged as the company reported a slight slowdown in revenue growth. Results in the most recent quarter were robust as the company raised its full-year forecast across a number of key metrics and showcased better-than-expected results.”
