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Stanley Druckenmiller is Bullish on AI, these are His Top 3 Stock Picks
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Famed investor, Stanley Druckenmiller hasn’t been shy about how bearish he is on the market, stating that he still believes there will be a hard landing sometime in the next year. However, he notes that “AI could be as transformative as the internet,” and that AI companies could have very strong earnings even in the face of an economic downturn.
In a recent interview with Bloomberg, Druckenmiller said that “we had a hard landing in 1974, 1975, but chemicals and oils did great.” So, while Druck is nervous about the health of this market, he is increasingly bullish on the AI sector nonetheless, saying that AI stocks have dominated his long portfolio over the last five months.
In the first quarter Druckenmiller bought new positions in Microsoft (MSFT - Free Report) and IQVIA Holdings (IQV - Free Report) , which are now in the top ten holdings of his equity portfolio. Microsoft is the majority investor in OpenAI, which has exploded onto the scene with its ChatGPT app, and IQVIA is a healthcare technology company utilizing AI for research and commercial purposes.
Additionally, he has owned Nvidia (NVDA - Free Report) , the big AI winner, since Q4 2022. It is currently the second largest position in his portfolio at 9.5%, all according to a 13F filing. It is worth noting that the 13F represents ~$2 billion of Druckemiller’s assets, which is just an estimated 20% of his net worth and excludes short positions and derivatives.
Image Source: Zacks Investment Research
Nvidia
Druck said that he could see himself owning Nvidia for several years, although he is well known for changing his mind on a dime. Nvidia currently boasts a Zacks Rank #1 (Strong Buy), indicating upward trending earnings revisions.
EPS and sales estimates have absolutely exploded higher over the last two months. Now that investors understand the magnitude of AI, and the computing power necessary, NVDA’s future business potential has shattered prior expectations.
Current quarter earnings have been revised higher by 96% and are expected to grow 300% YoY. FY23 earnings have been revised higher by 70% and are expected to climb 129% YoY.
Sales estimates have grown considerably as well, with next quarter sales projected to grow 100% YoY, FY23 sales to grow 60%, and FY24 sales to increase by 30%.
Image Source: Zacks Investment Research
The Nvidia price chart also offers a compelling technical trade setup. Although NVDA stock has rallied a whopping 180% YTD, momentum stocks like this often go further than expected. Additionally, this trade setup provides explicit points where it is no longer attractive to traders.
If NVDA can trade above the $395 level, it could push the stock to another new high. However, if the price can’t hold above $375, investors may want to be patient and wait for another opportunity to buy lower.
Image Source: TradingView
IQVIA
IQVIA is a leading global provider of advanced analytics, technology solutions, and clinical research services to the healthcare industry. The company leverages its deep expertise and comprehensive data to help clients make informed decisions.
Through AI algorithms and machine learning capabilities, IQVIA analyzes and interprets complex datasets, helping healthcare organizations optimize clinical trials, enhance patient safety, and make more informed decisions. By leveraging AI, IQVIA empowers healthcare professionals to identify patterns, predict trends, and uncover innovative solutions that drive efficiency, accuracy, and ultimately, better patient care.
IQV currently has a Zacks Rank #3 (Hold), indicating mixed earnings revisions. While the company has experienced steady growth in sales and earnings over the past decade, analysts are cautious in the near term.
Analysts have unanimously downgraded current quarter earnings by -5% over the last two months and EPS is expected to drop -3% YoY. The company still expects steady sales growth over the next two years though. FY23 sales are projected to grow 6% YoY and FY24 sales are expected to climb 9.2% YoY.
Image Source: Zacks Investment Research
IQV is trading at a one-year forward earnings multiple of 22.3x, which is above the market average of 20x, and in line with its 10-year median. Because of the mixed earnings revisions, and average valuation, investors may want to wait for the valuation to drop below its long-term median, or for analysts to raise estimates before considering buying.
Image Source: Zacks Investment Research
Microsoft
Microsoft is another technology giant that is very well positioned for the AI revolution. With its OpenAI investment, and litany of software and hardware products which will be further enhanced by the integration of AI technology, MSFT is a logical investment for those looking to get exposure to the burgeoning sector.
MSFT has experienced some mixed earnings revisions over the last two months contributing to its Zacks Rank #3 (Hold). However, analysts are beginning to upgrade their views, with the majority posting mildly bullish expectations.
Image Source: Zacks Investment Research
Microsoft does have a stretched valuation at the moment though. It is currently trading at a one-year forward earnings multiple of 34x, which is above the market average of 20x, and well above its 10-year median of 25x. With a historically rich valuation and mixed earnings estimates, investors may want to wait for one of these to improve, although Druckenmiller certainly sees something he likes.
Image Source: Zacks Investment Research
Bottom Line
The AI movement is still in its infancy, so investors have ample opportunity to get involved in the sector. As one of the world's pre-eminent investors Stanley Druckenmiller’s portfolio offers a glimpse into just a few of the options investors have.
Great investors are just people too though, so everything they say is worth being scrutinized, and considered thoughtfully. Druckenmiller has access to the same information as everyone else, so there is no reason retail investors can’t find and invest in the next AI gem.
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Stanley Druckenmiller is Bullish on AI, these are His Top 3 Stock Picks
Famed investor, Stanley Druckenmiller hasn’t been shy about how bearish he is on the market, stating that he still believes there will be a hard landing sometime in the next year. However, he notes that “AI could be as transformative as the internet,” and that AI companies could have very strong earnings even in the face of an economic downturn.
In a recent interview with Bloomberg, Druckenmiller said that “we had a hard landing in 1974, 1975, but chemicals and oils did great.” So, while Druck is nervous about the health of this market, he is increasingly bullish on the AI sector nonetheless, saying that AI stocks have dominated his long portfolio over the last five months.
In the first quarter Druckenmiller bought new positions in Microsoft (MSFT - Free Report) and IQVIA Holdings (IQV - Free Report) , which are now in the top ten holdings of his equity portfolio. Microsoft is the majority investor in OpenAI, which has exploded onto the scene with its ChatGPT app, and IQVIA is a healthcare technology company utilizing AI for research and commercial purposes.
Additionally, he has owned Nvidia (NVDA - Free Report) , the big AI winner, since Q4 2022. It is currently the second largest position in his portfolio at 9.5%, all according to a 13F filing. It is worth noting that the 13F represents ~$2 billion of Druckemiller’s assets, which is just an estimated 20% of his net worth and excludes short positions and derivatives.
Image Source: Zacks Investment Research
Nvidia
Druck said that he could see himself owning Nvidia for several years, although he is well known for changing his mind on a dime. Nvidia currently boasts a Zacks Rank #1 (Strong Buy), indicating upward trending earnings revisions.
EPS and sales estimates have absolutely exploded higher over the last two months. Now that investors understand the magnitude of AI, and the computing power necessary, NVDA’s future business potential has shattered prior expectations.
Current quarter earnings have been revised higher by 96% and are expected to grow 300% YoY. FY23 earnings have been revised higher by 70% and are expected to climb 129% YoY.
Sales estimates have grown considerably as well, with next quarter sales projected to grow 100% YoY, FY23 sales to grow 60%, and FY24 sales to increase by 30%.
Image Source: Zacks Investment Research
The Nvidia price chart also offers a compelling technical trade setup. Although NVDA stock has rallied a whopping 180% YTD, momentum stocks like this often go further than expected. Additionally, this trade setup provides explicit points where it is no longer attractive to traders.
If NVDA can trade above the $395 level, it could push the stock to another new high. However, if the price can’t hold above $375, investors may want to be patient and wait for another opportunity to buy lower.
Image Source: TradingView
IQVIA
IQVIA is a leading global provider of advanced analytics, technology solutions, and clinical research services to the healthcare industry. The company leverages its deep expertise and comprehensive data to help clients make informed decisions.
Through AI algorithms and machine learning capabilities, IQVIA analyzes and interprets complex datasets, helping healthcare organizations optimize clinical trials, enhance patient safety, and make more informed decisions. By leveraging AI, IQVIA empowers healthcare professionals to identify patterns, predict trends, and uncover innovative solutions that drive efficiency, accuracy, and ultimately, better patient care.
IQV currently has a Zacks Rank #3 (Hold), indicating mixed earnings revisions. While the company has experienced steady growth in sales and earnings over the past decade, analysts are cautious in the near term.
Analysts have unanimously downgraded current quarter earnings by -5% over the last two months and EPS is expected to drop -3% YoY. The company still expects steady sales growth over the next two years though. FY23 sales are projected to grow 6% YoY and FY24 sales are expected to climb 9.2% YoY.
Image Source: Zacks Investment Research
IQV is trading at a one-year forward earnings multiple of 22.3x, which is above the market average of 20x, and in line with its 10-year median. Because of the mixed earnings revisions, and average valuation, investors may want to wait for the valuation to drop below its long-term median, or for analysts to raise estimates before considering buying.
Image Source: Zacks Investment Research
Microsoft
Microsoft is another technology giant that is very well positioned for the AI revolution. With its OpenAI investment, and litany of software and hardware products which will be further enhanced by the integration of AI technology, MSFT is a logical investment for those looking to get exposure to the burgeoning sector.
MSFT has experienced some mixed earnings revisions over the last two months contributing to its Zacks Rank #3 (Hold). However, analysts are beginning to upgrade their views, with the majority posting mildly bullish expectations.
Image Source: Zacks Investment Research
Microsoft does have a stretched valuation at the moment though. It is currently trading at a one-year forward earnings multiple of 34x, which is above the market average of 20x, and well above its 10-year median of 25x. With a historically rich valuation and mixed earnings estimates, investors may want to wait for one of these to improve, although Druckenmiller certainly sees something he likes.
Image Source: Zacks Investment Research
Bottom Line
The AI movement is still in its infancy, so investors have ample opportunity to get involved in the sector. As one of the world's pre-eminent investors Stanley Druckenmiller’s portfolio offers a glimpse into just a few of the options investors have.
Great investors are just people too though, so everything they say is worth being scrutinized, and considered thoughtfully. Druckenmiller has access to the same information as everyone else, so there is no reason retail investors can’t find and invest in the next AI gem.