2 Top AI Stocks Prominent Billionaires Are Buying

Buying and holding shares of the best businesses in the world is the easiest way to build wealth over the long term. Some of the largest, most profitable companies in the world also just happen to be in a prime position to benefit from global adoption of artificial intelligence (AI), which is expected to add $15.7 trillion to the global economy by 2030, according to PwC.

Investors wondering where to place their bets only have to look at the latest round of quarterly disclosures from the wealthiest investors. Billionaire fund managers are required to report their holdings on Form 13F with the Securities and Exchange Commission. Here are two dominant tech companies that prominent billionaires were buying in the second quarter.

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1. Microsoft

Stanley Druckenmiller bought a new position in Microsoft (MSFT -0.65%) for his Duquesne Family Office in the second quarter. Druckenmiller has led a successful career, previously managing billions in assets for clients before closing his hedge fund in 2010. Other billionaire fund managers, such as Daniel Loeb of Third Point and Chase Coleman of Tiger Global, were also adding to their firms’ stakes in the stock last quarter.

There’s a lot to like about Microsoft. It has a long history of generating steady growth in revenue and profits. Over the past year, it generated $102 billion in net profit on $282 billion in revenue. While there’s talk on Wall Street of a potential AI bubble, Microsoft continues to report strong financial results and point to opportunities that bolster the investment case.

The reason to like Microsoft right now is that it is seeing strong demand for its Azure cloud service for enterprise. Revenue from Azure and other cloud services grew 39% year over year in the June-ending quarter. This is higher than the previous quarter’s 33% growth.

“We will continue to invest against the expansive opportunity ahead across both capital expenditures and operating expenses, given our leadership position in commercial cloud, strong demand signals for our cloud and AI offerings, and significant contracted backlog,” CFO Amy Hood said during the earnings call.

What this means is that investors are likely still underestimating the demand for AI cloud infrastructure. AI is completely transforming how businesses operate, and we can see this in Microsoft’s growing investment in data centers and technology. Its capital expenditures have more than doubled over the past two years to $64 billion, and Hood’s statement suggests these investments will keep growing.

Importantly, Microsoft’s strong cloud growth shows that it is competing effectively with Amazon (AMZN -1.16%), which has led the cloud market for many years. It’s also competing against Alphabet‘s Google Cloud, which has made great strides over the past year with Gemini — one of the best AI models out there.

The dilemma for investors buying Microsoft stock is its valuation. Its forward price-to-earnings (P/E) ratio of 32 is nearly three times Microsoft’s expected earnings growth of 12% over the long term. A good rule of thumb is to look for growth stocks trading at a PEG ratio closer to 1. But Druckenmiller may see Wall Street’s consensus earnings estimate as too conservative, as it reported a 24% year-over-year increase in earnings last quarter, and management’s commentary still points to a lot more growth ahead.

Image source: Getty Images.

2. Amazon

Druckenmiller sold out of Amazon in favor of Microsoft last quarter, which may reflect his belief that Azure’s momentum puts it in a superior position in AI. But other billionaires see upside for the e-commerce and cloud leader. Pershing Square’s Bill Ackman bought over 5.8 million shares of Amazon stock in Q2, a large stake worth nearly $1.3 billion at quarter’s end.

Ackman has a record of delivering market-beating returns for his investors. Over the last 22 years, Pershing Square grew an original investment by a 27-fold, compared to a 9-fold gain if clients had invested in the S&P 500. Ackman prefers to concentrate his portfolio in a handful of carefully selected investment opportunities, usually no more than a dozen holdings. This means only his highest-conviction ideas make it into the portfolio.

This investment by Ackman comes as Amazon saw a notable acceleration in growth for its e-commerce business in the second quarter. Its total sales grew 12% year over year on a constant-currency basis, driven by a 10% increase in the online store. This is the first quarter of double-digit growth for the online store since Q3 2022.

Moreover, management continues to focus on improving cost efficiency in processing and shipping orders to customers. Amazon has seen its operating profit increase by a whopping 471% since 2022 to $77 billion over the last year.

The only negative for Amazon is that its cloud business (Amazon Web Services) is growing at about half the rate of Microsoft Azure and Google Cloud. There could be several reasons why businesses are opting for a competitor over Amazon in the cloud market, but investors shouldn’t overlook the value AWS brings to Amazon’s business. Amazon has gained valuable AI capabilities that power product recommendations, optimize delivery routes, and improve product experiences with the Alexa voice assistant.

Amazon Web Services (AWS) could slip to the No. 2 spot in the cloud market, but that doesn’t mean AWS is a lost cause. AWS’s generative AI business is experiencing triple-digit growth, while 85% of information technology spending is still going to on-premises servers. With the size of that opportunity, AWS should keep growing for many years. Its revenue grew 17% year over year in Q2, after signing new agreements with PepsiCo, Airbnb, and Peloton Interactive.

Ackman may see more room for management to improve margins in the online retail business, in addition to a lot of opportunity for double-digit growth in cloud computing. The stock’s forward P/E of 34 reflects high investor expectations for growth, as the consensus analyst estimate calls for Amazon’s earnings to grow at an annualized rate of 18% in the coming years, which is higher than estimates for Microsoft.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Airbnb, Alphabet, Amazon, Microsoft, and Peloton Interactive. 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.