Investing
Billionaires Sold Six Magnificent Seven AI Stocks in Q2. One Fund Bought Four Others.
By Bear Creek Staff, . Bear Creek Capital Network.
David Tepper's Appaloosa Management sold its entire Microsoft stake in the second quarter. In the same quarter it opened a new position in Apple and added to its holdings of Meta, Amazon and Alphabet. That one fund's moves show why a list of billionaire sales is not the same thing as a vote against AI.
Appaloosa was one of several billionaire-run funds that sold six of the seven so-called Magnificent Seven technology stocks between April and June, according to a Motley Fool analysis published October 16.
The six sales
Apple: Ole Andreas Halvorsen's Viking Global Investors sold all of its nearly 3.6 million shares.
Microsoft: Appaloosa exited, selling 90,000 shares.
Amazon: Two Sigma, the fund co-founded by billionaires John Overdeck and David Siegel, exited its whole stake.
Alphabet: Leon Cooperman sold all 75,000 of his shares in Google's parent.
Meta Platforms: Dan Loeb's Third Point exited.
Tesla: Two Sigma also sold out of Tesla.
Each of the six was a full exit by that fund rather than a trim, and each was one investor's sale of one stock, not a group of funds turning on the whole set.
Why the funds might be selling
The analysis does not report any of the funds' own reasons, and a sale on its own does not reveal a motive. The Motley Fool's author, Bram Berkowitz, frames the selling against a wider worry about AI: the largest cloud companies have committed hundreds of billions of dollars to AI infrastructure, and some investors doubt the returns will be strong enough to justify it. He also notes broader caution after several strong years for stocks.
Berkowitz's own read is that the sales reflect views on individual companies as much as on AI. Appaloosa's activity fits that reading: it left Microsoft while buying into four of the other six. That is an interpretation of the trades, not something the analysis reports.
The numbers in the analysis
As of the October 16 analysis, Tesla traded at nearly 215 times forward earnings, a valuation Berkowitz says already assumes significant success for its robotaxi and humanoid robot plans. Amazon had planned about $220 billion of capital spending this year, and its Amazon Web Services cloud unit had just reported 37% annual revenue growth, its best in 18 quarters.
Berkowitz says he would avoid Tesla and names Amazon and Apple as his preferred picks, arguing that Apple can benefit from AI without spending hundreds of billions on data centers. Those are the author's opinions. Funds' trades come to light only after they are made, often months later, so any of these funds may have traded again since.
What to watch
Capital spending: whether the big technology companies keep raising, hold or cut their data center budgets will show how confident they are in AI demand.
Free cash flow: the cash left after that spending. If it keeps shrinking at companies once known for generating plenty of it, worries about the returns on AI spending could deepen.
Cloud revenue growth: growth at cloud units such as AWS can show whether customer demand is keeping pace with the spending.
Revenue from AI products themselves: the clearest test of whether the spending pays off is money coming in from AI features and services, not just more of them.
Bear Creek Capital Network publishes content for informational and educational purposes only. Nothing in this article constitutes financial, investment, tax or legal advice, or a recommendation to buy or sell any security. Consider your own circumstances and consult a qualified professional before making financial decisions.