Billionaire Stanley Druckenmiller Sold Palantir and Amazon and Is Piling Into This Artificial Intelligence (AI) Stock Instead

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a day ago

Back in 2022, billionaire Stanley Druckenmiller made a sizable bet on chipmaker Nvidia. The company has gone on to become one of the biggest winners of advancements in generative AI, for which its graphics processing units (GPUs) are well suited. Druckenmiller has also been an investor in Palantir Technologies (NASDAQ: PLTR), which has used AI to improve its software and expand its market. Druckenmiller has also made a lot of money by investing in Amazon (NASDAQ: AMZN) throughout his career, taking advantage of the cloud computing leader's growth.
But Druckenmiller is shifting his attention and his money away from these AI giants. He sold out of Nvidia about a year ago (although he says he regrets that decision). In the first quarter, he got rid of his remaining shares of Palantir and trimmed his Amazon investment by more than half. In their place, he's buying a different company that stands to benefit from continued spending on AI development but whose stock looks undervalued.
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Why Druckenmiller is selling Palantir and Amazon
Both Amazon and Palantir are producing strong results as enterprise customers spend heavily on AI software and development.
Palantir has seen its U.S. commercial business take off thanks to its Artificial Intelligence Platform (AIP). Businesses are expanding their use cases for AIP, and the service is reducing the need for clients to hire new workers. That has helped Palantir grow revenue extremely quickly without much overhead, resulting in strong earnings growth.
Amazon remains the largest public cloud platform in the world with Amazon Web Services (AWS). The company is seeing strong demand for AI services on AWS, and it's spending as quickly as it can to meet that demand, including plans to pour over $100 billion into capital expenditures (mostly for AWS) in 2025. The operating margin for AWS has soared to nearly 40%, pushing Amazon's operating profits considerably higher.
But Druckenmiller's decision to reduce his stake in these companies seems to be based purely on valuation. Indeed, Palantir is one of the most expensive stocks on the market trading at over 75 times management's 2025 revenue outlook.
Druckenmiller has also traded in and out of Amazon stock based on price, and shares reached an all-time high of more than $240 per share last quarter.
With all that in mind, it appears Druckenmiller has found a suitable replacement in the AI space that offers exceptional value at its current price.
Here's the AI stock Druckenmiller is piling into
With hyperscalers like Amazon committing to investing billions of dollars per year in AI data centers, the growth in AI spending seems to be far from over. One company stands behind practically all of the silicon chips you'll find in those data centers: Taiwan Semiconductor Manufacturing (NYSE: TSM), or TSMC.
TSMC is the leading chip manufacturer in the world, commanding a dominant share of the market. Its lead is cemented by the best-in-class technology required for making the most cutting-edge chips. That's why companies like Nvidia choose TSMC to print and package its chips. Using another manufacturer would likely result in a higher cost with an inferior product.
TSMC benefits from a virtuous cycle. It's the largest chip manufacturer in the world, which means it brings in a ton of revenue. It can, therefore, invest more in research and development and capital expenditures to maintain its technological lead and ensure enough capacity to meet growing demand. That, in turn, brings in more revenue. That said, chip fabrication is a capital-intensive, cyclical business. If demand falls, TSMC is still responsible for maintaining its expensive equipment, even if it's not producing as many chips.
The good news for investors is that TSMC also expects strong growth in AI spending through the end of the decade. Management believes AI-related revenue will double this year, and the company could produce a compound annual growth rate of close to 40% for AI chips through 2029. Overall, management is guiding for 20% compound annual growth for the entire business. Revenue is up over 43% year over year through the first four months of 2025.
Despite the potential for strong revenue growth over the next five years with excellent gross and operating margin profiles, the stock trades for less than 21 times forward earnings estimates. There's a reason to discount the stock somewhat, given the ongoing global trade war launched by the Trump Administration and the geopolitical risk surrounding Taiwan. But the current valuation still looks extremely attractive for investors, and Druckenmiller seems to agree.
Druckenmiller tiptoed into the stock in the second half of last year, investing about $20 million, but he more than quintupled his investment in the first quarter, making it one of his biggest holdings. With TSMC's share price sitting around where it started the year, there is still an opportunity to join Druckenmiller with an investment in TSMC.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Levy has positions in Amazon and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Amazon, Nvidia, Palantir Technologies, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.