Nvidia stock has gained nearly 700% over the past two years.
The mega-hype surrounding Nvidia‘s (NVDA 2.48%) 10-for-1 stock split and its brief stint as the most valuable company on the market is in the past, but Nvidia still might be the most closely followed stock in the investing community today.
However, since it has gained nearly 700% over the past two years, some investors are concerned about how much higher it can go in the near term. Several billionaires have been pocketing some of their gains and using them to fund other investments that might have more near-term fuel.
Some examples are Israel Englander of Millennium Management, who sold 2,409,326 shares of Nvidia in the 2024 first quarter, or 64% of his fund’s position; Ken Griffin of Citadel, who sold 883,563 shares, or 43% of his position; and John Overdeck and David Siegel of Two Sigma, who sold 451,464 shares, or 77% of their position.
Instead, all four billionaire investors bought a different artificial intelligence (AI) stock: Amazon (AMZN 0.03%). Englander bought 2,476,287 shares, or 34% more; Griffin added 4,673,930 shares, a 246% increase; and Overdeck and Siegel added 364,950 shares to their position, a 41% increase.
Should investors follow their lead?
Amazon might be the best AI stock to buy today
Nvidia and Amazon are both deeply invested in the generative AI revolution, but they run very different businesses and even work together. Nvidia makes the graphics processing units (GPUs) that power generative AI, which is the main reason its stock has skyrocketed over the past two years, while Amazon is developing applications to make generative AI work.
Amazon has rolled out a competitive set of generative AI applications that help developers create powerful tools to make businesses run better. These are directed at Amazon Web Services (AWS) clients. This is Amazon’s cloud computing segment, and it’s the leading global provider of cloud services.
Some tools include chatbots and virtual assistants that can take some of the load away from human customer-service agents, freeing up resources and leading to higher efficiency; code prompts for developers, who can use more time for creative processes instead of manual coding; and high-level data analytics that can help companies make faster, more accurate decisions.
Of the many companies that are already using these tools, one example Amazon highlighted is DoorDash, which used AWS generative AI tools to build a self-service contact center for its delivery personnel.
This is an incredible opportunity for several reasons. As the largest cloud computing company in the world, Amazon stands to benefit from clients moving over to these tools, and it can also attract new clients to maintain and grow its lead. According to management, company spending on cloud tools is still a small percentage of total information-technology expense, leaving a wide gap that’s ripe for the taking.
AWS is already on the upswing again after facing inflationary pressure. Sales increased 17% year over year in the 2024 first quarter, and management says trends are stabilizing after clients went through some cost-optimization.
It’s not just AI
Amazon uses AI throughout its operations, which it has been doing since well before AI became an investor buzzword.
Machine learning and data analytics are at the root of Amazon’s e-commerce business. They offer recommendations for customers looking for a specific product, along with instant comparisons between similar products to help customers choose and convert higher sales. It also uses these kinds of tools in its vast delivery network to make instant calculations about the fastest and cheapest routes to get an order fulfilled.
The company is using the same infrastructure to build up its advertising business. There might not be any better platform for Amazon’s third-party vendors to advertise their products than on its site, where hundreds of millions of Prime members and other shoppers are already looking for their products.
The company can send the right ads to the right shoppers with unmatched accuracy, increasing sales for vendors and Amazon, and increasing the success of its ad business.
Amazon stock is a rock
Nvidia is still an excellent company with strong long-term growth drivers, but investors are worried that with a high valuation and increasing competition, it could have some of its growth priced in. Nvidia stock is already down slightly from its recent jump that resulted from its split.
Amazon stock, on the other hand, is demonstrating strong and steady growth. It’s up 32% this year but only 9% over the past three years — in other words, it only recently surpassed its previous high, so you can still get in while it’s climbing. The company has massive long-term opportunities, and investors can feel confident following billionaire investors into a position, or increasing a position, in Amazon stock.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, DoorDash, and Nvidia. The Motley Fool has a disclosure policy.
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