5. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 125
The rising demand for Salesforce, Inc.’s (NYSE:CRM) cloud-based AI solutions has helped the company’s stock price double over the past 12 months. The company claims that its goal is to create a single, integrated platform that combines CRM, data, AI, and trust. Salesforce, Inc. (NYSE:CRM) reported $1.25 earnings per share, a significant increase from $0.21 in the previous year. The company’s revenue increased by 11.2% to $8.72 billion. Salesforce, Inc. (NYSE:CRM) anticipates generating double-digit revenue and earnings growth in 2024. The company also anticipates generating a 30% growth in operating cash flows.
Hedge fund confidence in a cloud-based CRM company remained high. According to Insider Monkey data, it was in 125 hedge fund portfolios at the end of the third quarter.
4. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 180
NVIDIA Corporation (NASDAQ:NVDA) stock has risen more than 230% in the last year as it has greatly benefited from AI technology. Its high-performance AI chips are in high demand in data centers. Its record revenue of $18 billion in the third quarter increased by 34% sequentially and by 209% year over year. Its record data center revenue of $14.51 billion was up 41% from the previous quarter and 279% from the previous year. Its fourth-quarter revenue is expected to hit a new record of $20 billion.
In the third quarter investor letter, Blue Tower Asset Management, an investment management company, expressed its confidence in the future fundamentals of NVIDIA. Here is what the firm stated:
“In addition to the use of larger datasets, the training speed of AI models has increased dramatically. NVIDIA Corporation (NASDAQ:NVDA)’s stock almost tripled in the first 3 quarters of this year with a 197% gain, and a large reason for this is the huge role they have played in recent AI improvements. Nvidia’s single GPU AI training speed performance has increased by a dramatic 1000x in 10 years with only 2.5x coming from Moore’s Law3 driven increases in chip density. Besides better chip manufacturing, there were three other improvement factors at play: simplifications in number representation for the weights of the neural networks, more complex mathematical instructions for reducing the computational overhead involved in mathematical calculations, and increased neuron sparsity (in neural networks, some neurons are useless and can be pruned from the network without reducing performance significantly). In addition to these single GPU improvements, Nvidia also made improvements in data center scale architecture that allows groups of GPUs to work more efficiently together.
It is noteworthy that the vast majority of the improvement came from hardware architectural and software data improvements, rather than transition density. These improvements were likely the low-hanging fruit of training speed improvements as researchers will eventually converge on an ideal architecture. The simplification of going from 32-bit to 8-bit floating point numbers for measuring weights is a one-time gain that can’t be repeated again. I expect the rate of improvement to slow down over the next ten years and eventually approach the levels of Moore’s Law improvements in chip efficiency. The historical trend for computer hardware is for it to eventually be commoditized, and I believe this will eventually occur for Nvidia’s GPUs as well.”
3. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 221
Alphabet Inc. (NASDAQ:GOOGL) is aiming to be a market leader in artificial intelligence technology, and it has been investing heavily to capitalize on strong demand. Alphabet’s generative AI model, Gemini AI, is one of OpenAI’s main competitors. It also has a division dedicated to cloud computing. Google’s potential investment in Character.AI, an emerging artificial intelligence chatbot startup, is part of its strategic investments in AI companies. In addition, the company has invested nearly $2 billion in Anthropic, a leading AI firm with its own chatbot.
In the third quarter investor letter, Diamond Hill Capital, an investment management company, expressed its confidence in Alphabet’s advertising and cloud businesses. Here is what the firm stated:
“On an individual holdings’ basis, top contributors to return in Q3 included long positions in KKR, Ciena Corporation and Alphabet. Shares of media and technology company Alphabet Inc. (NASDAQ:GOOG) rose in the quarter as its advertising and cloud businesses remain robust and the company delivered results ahead of market expectations. From a sector perspective, communication services also managed a positive Q3 (2%), riding the ongoing wave of positive mega-cap stocks’ performance, like Alphabet.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 286
Amazon has also been investing significantly in AI to compete for market share. It recently announced a $4 billion investment in Anthropic, an AI firm that has also gained Alphabet’s trust. Anthropic will use Amazon Web Services (AWS) for critical workloads. Amazon has also incorporated AI into its other products, such as the Alexa voice assistant.
Lakehouse Capital, a Sydney-based investment manager, mentioned Amazon in its third-quarter investor letter. Here is what the firm stated:
“The Fund’s largest position, Amazon.com, Inc. (NASDAQ:AMZN), delivered an impressive quarterly result that came in well ahead of analysts expectations. Net sales increased 11% year-on-year to $134.4 billion and operating profits increased 133% year-on-year to $7.7 billion (vs the high end of guidance at $5.5 billion). Despite fears of a slowdown, growth within their core e-commerce business proved resilient and it was particularly encouraging to see progress on the cost front drive meaningful operating leverage. Management has been laser focused on driving efficiencies across the retail operation for the last 18 months and it’s now clear that these efforts are paying off with the company reporting its highest operating margin in two years. One notable initiative has been the regionalisation of their US fulfilment network from one national network to a series of eight separate regions serving smaller geographic areas, which has already delivered a 20% reduction in the number of touches per package and a 19% reduction in miles travelled.
When it comes to the company’s second largest segment, Amazon Web Services (AWS), revenue grew 12%, which is by no means earth shattering, but it was comforting as growth is now stabilising after six quarters of deceleration led by macro-driven customer optimizations. As we have mentioned before, we have always believed the recent AWS optimisation headwinds are more cyclical in nature, as opposed to anything fundamental, and a stabilisation in growth rates combined with a more upbeat outlook are strong evidence that this is likely the case. Bigger picture, we continue to believe that the market underestimates the length of the runway ahead in the core retail business (note that e-commerce sales in the US still only make up 15% of total retail sales) and that there is still significant margin expansion ahead as scale and efficiency benefits continue to come through.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 306
Microsoft Corporation (NASDAQ:MSFT) is a leading player in the artificial intelligence space and is ranked first among the best artificial intelligence stocks to buy for 2024 according to financial media. Microsoft has invested nearly $13 billion in OpenAI, the founder of the ChatGPT model. In 2023, the company has also invested in other AI startups such as Inflection AI and Builder.ai. Microsoft estimates that the company will make $10 billion from its partnership with OpenAI and other players in the AI space. Microsoft stock has risen by around 55% in the last year. Investors are also impressed by the company’s double-digit revenue and earnings growth.
Microsoft is the most popular stock among the more than 900 hedge funds tracked by Insider Monkey. As of the end of the third quarter, it was in 306 hedge fund portfolios, up from 300 the previous quarter.
You can also take a look at The 10 Best Telecom Companies to Invest In and Jim Cramer Stock Portfolio: 12 Recent Additions.
