The amount of data thrown investors' way can, at times, feel overwhelming. Between earnings season -- a six-week period each quarter where an overwhelming majority of the most-influential public companies report their quarterly operating results -- and a steady stream of economic data releases, it can be tough for the everyday investor to keep up.
Less than two weeks ago, one of these critical data drops occurred, and it's quite possible you missed it.
May 15 marked the deadline for institutional investors with at least $100 million in assets under management (AUM) to file Form 13F with the Securities and Exchange Commission. A 13F provides a concise snapshot of which stocks and exchange-traded funds (ETFs) Wall Street's brightest and most-successful money managers bought and sold in the latest quarter. In this instance, the May 15 filing deadline outlines trading activity for the March-ended quarter.
For instance, Ole Andreas Halvorsen of Viking Global Investors is also known for his investing prowess and ability to spot a phenomenal deal. Halvorsen, who's overseeing close to $31.5 billion in AUM spread across 91 holdings, has a penchant for concentrating his portfolio in his best ideas, just like Buffett.
But unlike the Oracle of Omaha, Halvorsen is a big fan of the tech sector, growth stocks, and Wall Street's hottest trends, which includes the evolution of artificial intelligence (AI).
During the first quarter, Viking Global investors' 13F shows that Halvorsen was a big-time buyer of three world-leading AI stocks, but curiously dumped the entirety of his fund's stake in the cheapest member of the "Magnificent Seven."
Viking Global's Halvorsen is loading up on three foundational AI stocks
To be clear, Halvorsen and his top advisors are fairly active. The average holding time of Viking Global's 91 holdings is a little over 17 months, which signals a willingness to swing trade and lock in profits.
With this in mind, Viking Global's billionaire chief green-lit the aggressive purchase of three foundational artificial intelligence stocks in the March-ended quarter:
Nvidia(NASDAQ: NVDA): 4,511,122 shares purchased
Meta Platforms(NASDAQ: META): 1,466,311 shares purchased
Tesla(NASDAQ: TSLA): 350,084 shares purchased
The stakes in social media colossus Meta Platforms and North America's electric-vehicle (EV) kingpin Tesla are both new, while the add to Viking Global's Nvidia stake increased its position by about 222% from the December-ended quarter.
Why load up on these three stocks? For one, the addressable market for AI is enormous. In Sizing the Prize, PwC estimated it would provide a $15.7 trillion boost to the global economy by 2030. This is a big enough figure that plenty of companies can benefit.
Nvidia's Hopper (H100) and Blackwell graphics processing units (GPUs) are currently the top option for businesses wanting to run generative AI solutions and build/train large language models (LLMs). Meanwhile, Meta and Tesla are some of the leading applications companies deploying AI solutions. Meta has incorporated generative AI solutions into its platform for advertisers, while AI is at the heart of Tesla's full self-driving software that assists drivers.
Nvidia, Meta Platforms, and Tesla also offer reasonably sustainable moats, which allows for aggressive innovation and investment in AI that most other businesses can't match:
Nvidia holds the lion's share of the AI-GPU market and is generating boatloads of annual operating cash flow.
Meta Platforms averaged 3.43 billion daily active people visiting its social sites in March, which is far more eyeballs than any other social media company.
Tesla is leaning on its first-move advantages, which allow it to profitably sell more EVs than any other auto company.
To be objective, none of these foundational companies are without their own unique headwinds. Nvidia's gross margin has been declining for a year, which likely points to an increase in AI-GPU competition. As for Meta, it's ad-driven operating model is intricately tied to the health of the U.S. and global economy. Lastly, Tesla's EV margin has plunged as competitive pressures have mounted.
Image source: Getty Images.
Billionaire Halvorsen bids adieu to the cheapest Mag-7 stock
On the other side of the coin, Ole Andreas Halvorsen oversaw the complete sale of 22 stocks during the first quarter, as well as reductions in 28 others.
Among the 22 stocks that were given the heave-ho is the cheapest Magnificent Seven stock, based on forward price-to-earnings (P/E) ratio, Alphabet(NASDAQ: GOOGL)(NASDAQ: GOOG). Viking Global sold all 3,661,375 of the Class A shares (GOOGL) it had held since the third quarter of 2024. For added context, Alphabet was Halvorsen's 14th-largest holding (out of 85) when 2024 came to a close.
One of the possible reasons Halvorsen's interest in Alphabet faded in the first quarter has to do with the questions surrounding the use of LLMs in search. Some investors believe that as LLM's are "trained" and become smarter over time, they'll be able to provide a level of search that's on par, or potentially better, than what Google's search engine can currently deliver.
Another potential worry is the U.S. Justice Department's attempt to break up Alphabet by forcing the company to sell its popular Chrome browser and, possibly, its Android operating system. The Justice Department has argued the company's search monopoly has stifled competition and innovation. Though it's not clear if breaking up Alphabet would mean less value for the sum of the parts, it's an unknown variable -- and Wall Street doesn't like unknowns.
The third factor that may have played a role in Ole Andreas Halvorsen ditching his fund's Alphabet stake is the prospect of the U.S. economy falling into a recession. In the neighborhood of three-quarters of Alphabet's net sales come from advertising. With the initial first-quarter read on U.S. gross domestic product showing an annual 0.3% contraction, there's genuine concern of a recession taking shape.
While these are all tangible concerns, it's fair to question if these worries are already factored into Alphabet's valuation. For instance, Google has consistently maintained an 89% to 93% share of worldwide internet search dating back more than a decade. It's highly unlikely this cash cow of an operating segment is going to notably struggle anytime soon.
Alphabet also has copious amounts of cash on hand to deploy in various AI solutions. For example, incorporating generative AI solutions into Google Cloud, the world's No. 3 cloud infrastructure service platform by total spend, should accelerate this segment's already impressive growth rate. Further, cloud-service margins are considerably juicier than advertising margins for Alphabet.
With Alphabet stock trading at a forward P/E of 16, as of this writing, the potential reward for investors appears to heavily outweigh any near-term risks.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Sean Williams has positions in Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Berkshire Hathaway, Meta Platforms, Nvidia, and Tesla. The Motley Fool has a disclosure policy.
