Druckenmiller Bets Big on Amazon and Alphabet in AI Compute Shift

Billionaire investor Stanley Druckenmiller has been betting big on artificial intelligence (AI) companies. In 2022, he bought Nvidia for his Duquesne Family Office portfolio and made hundreds of millions of dollars from that purchase. However, he admitted to selling the stock too soon in 2024.

Druckenmiller recently sold another AI chip stock, Broadcom, fully exiting his position last quarter. At the same time, he purchased large stakes in Amazon and Alphabet, two other major players in the AI compute supply chain.

The trend towards hyperscalers taking control of their own destinies may have prompted Druckenmiller's decision to sell Broadcom and buy into Amazon and Alphabet. The companies are investing heavily in new data centers to meet growing demand for AI compute, which may benefit them more than chipmakers like Broadcom.

Amazon CEO Andy Jassy said that the majority of new chips going into its data centers this year will be custom Trainium chips designed by AlChip, not Nvidia GPUs or other off-the-shelf solutions. Alphabet is also seeing strong demand for its Tensor Processing Units (TPUs) and is even selling TPU systems to external customers.

The long-term trend favors companies with the greatest control over which chips are made and by whom, and that power seems to be in the hands of the big hyperscalers. Druckenmiller may have seen this shift as an opportunity to buy Amazon and Alphabet at historically low P/E ratios, with Amazon trading for just 20.5 times forward earnings expectations and Alphabet trading for just 16.4 times.