We recently compiled a list of the 10 Best Tech Stocks to Buy According to Brad Gerstner. In this article, we are going to take a look at where Amazon.com Inc (NASDAQ:AMZN) stands against the other tech stocks.
Gerstner is Bullish on Tech in 2024
On December 1, 2023, Brad Gerstner, the CEO of Altimeter Capital, appeared in an interview on CNBC where he explained that tech stocks are expected to outperform non-tech stocks in 2024. Over the past 10 years, tech earnings have compounded at almost 16% and non-tech earnings have compounded at 6%. 2023 was a rebound year for the tech industry after a downturn in 2022 due to rising interest rates. Big Tech companies and their operational efficiencies have poised them for strong growth. While inflation and interest rates will determine what goes down, companies that have invested in augmented intelligence will experience secular growth. Gerstner thinks that the spread between 16% and 6% will be a recurring trend in 2024.
Gerstner Thinks Now is the Right Time to Invest in Tech
On June 11, Brad Gerstner made another appearance on CNBC and addressed the speculation surrounding the software industry. Gerstner suggested that despite headwinds, the software industry is still valuable as companies and startups are still making deals. Gerstner believes there are three main reasons for the downward trajectory of the software industry. He thinks that CEOs and CTOs are cautious when it comes to making investments in software. Executives want a clearer picture of the AI boom before making risky investments. Moreover, interest rates are higher than expectations, due to delayed rate cuts and compressing multiples. Lastly, general uncertainty about the future has been detrimental to the growth of the software industry. Gerstner pointed out that since the software industry is trading at 20% below its ten-year average, this may be the best time to allocate stakes in software companies. You can also take a look at the best Robinhood stocks under $20.
Gerstner thinks data and databases are extremely vital to AI applications. He thinks that companies using data to power AI are far ahead of companies simply automating services. Big Tech companies have data at the forefront of all their artificial intelligence applications. You can also read our piece on the stocks hedge funds are crazy about right now.
Brad Gerstner is bullish on tech, and particularly software and AI. In Q1 2024, he initiated 6 new positions and also raised his stakes in 2 stocks, ending the quarter with a portfolio of $6.5 billion in 13F securities. With that, let’s discuss his top tech stock picks.
Our Methodology
We scanned Altimeter Capital’s Q1 portfolio and picked growth stocks from the fund’s top 13F holdings. Additionally, we’ve also added overall hedge fund sentiment, as of Q1 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Note: All pricing data is as of June 28.
A customer entering an internet retail store, illustrating the convenience of online shopping.
Amazon.com Inc (NASDAQ:AMZN)
Altimeter Capital’s Stake Value: $271,887,676
Number of Hedge Fund Holders: 302
Amazon.com Inc (NASDAQ:AMZN) ranks seventh on our list of the best tech stocks to buy according to Brad Gerstner. Gerstner increased his position in the stock by 21% in the first quarter of 2021. Amazon Web Services (AWS) revenue expanded by 17.2% in Q1 2024, up from 13.2% in Q4 2023. Amazon claims the growth in generative AI has fueled demand for AWS, as customers are excited to try out new features to enhance their experience. Over the next 2 decades, the company anticipates developing Generative AI products from scratch and on the cloud. Overall, capital expenditures by the company amounted to $48.4 billion in 2023 and $14 billion in Q1 2024. For 2024, the company plans to invest $10 billion to establish two data centers in Mississippi. This is the single largest investment made in the state and will create over 1,000 jobs. Amazon (NASDAQ:AMZN) also intends to invest over $5.3 billion in the Kingdom of Saudi Arabia and more than $5 billion in Mexico over the next few years. The investment is all0cated to launch new infrastructure regions and provide better choices for end users.
Overall, Amazon.com Inc (NASDAQ:AMZN) is one of the most popular stocks among investors, with 302 hedge fund holders at the close of Q1 2024, up from 293 positions in Q4 2023. Total stakes amounted to $60.37 billion. Based on median price targets from 65 analysts, the stock has an upside of 11%, from its current price of $197.85. Analysts hold a consensus Buy opinion on AMZN and the stock has surged 32% year-to-date.
Gerstner likes Amazon because of the company’s inclination to efficiency and meaningful expenditure on software. On February 2, Brad Gerstner appeared in an interview on CNBC, where he shed light on his bullish stance on AMZN. He emphasized the role of Amazon Web Services (AWS) in uplifting the stock. He believes that Amazon’s dominant position in retail will benefit from AI as the company would be able to focus on targeted ads. Here are some comments from the interview:
“I give a tremendous amount of credit to Andy Jassy and the team there they’re the market leader in cloud. We talk about them as coming from behind. They have a dominant retail business which is going to benefit from AI, from better targeting, better targeting of ads, and merchandise, and I think Jassy will drive efficiency in that business. Aws is the market leader I was concerned and some others were whether or not Microsoft’s early lead and their relationship with OpenAI would force them to leave Amazon and go to Azure to take advantage of the benefits of Openai we didn’t see that we saw almost no customer churn.”
Overall AMZN ranks 7th on our list of the best tech stocks to buy according to Brad Gerstner. You can visit 10 Best Tech Stocks to Buy According to Brad Gerstner to see the other tech stocks that are on hedge funds’ radar. While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
