In this piece we will talk about how to play the AI boom and the NASDAQ rally according to hedge fund manager Brad Gerstner.
One of the craziest trends these days is artificial intelligence. If you had asked the biggest hedge fund and analyst gurus last year if artificial intelligence would be dominating the airwaves as the next big thing this year, very few would have comfortably predicted this. Yet, here we are, and it’s all because of a chatbot called Chat GPT.
Ever since the first news of how ChatGPT was one of the strongest artificial intelligence powered conversational chatbots to be programmed, the media is full of how this is the age of AI and thousands of jobs are at risk. These reports are fueled by investment banks as well. For instance, a report from the investment bank Goldman Sachs estimates that AI could cost a stunning 300 million jobs – compare this with the population of the U.S., which sits at close to 332 million according to the latest estimates. However, the investment bank adds that while jobs will be lost, new ones will be added as well along with a productivity boom from those workers that have kept their jobs improving their output.
At the same time, for the savvy investor, artificial intelligence is nothing short of a boon. In fact, it’s a ray of hope in a market that is consistently plagued with the worry of a recession and the specter of rising interest rates. And, there’s one investor whose quite vocal about the benefit of artificial intelligence and the companies that are at the heart of this latest technological revolution. This investor is none other than Brad Gerstner of Altimeter Capital. When compared to some of the hedge fund behemoths in the financial industry which have portfolios worth tens of billions of dollars, Altimeter holds its ground with Insider Monkey’s research showing that it had a portfolio of $4.5 billion as of the first quarter of this year.
Mr. Gerstner recently made an appearance on CNBC, where he was nothing short of praise for artificial intelligence. In his talk, he shared that while the concerns of AI impacting the job market are valid; nevertheless, the market has seen a similar chorus each time a disruptive new technology surfaces. He outlined one such example in the form of the Internet and the talk around in the late 1990s – when some had worried that people would stop reading books due to the Web. However, right now, according to the hedge fund boss, the world is better now than it was back then – and we’d like to add that books are still sold today as well.
While we’ll get into Mr. Gerstner’s pure play AI stock picks a bit later, one company that he mentioned during his interview was the Cupertino, California technology giant Apple Inc. (NASDAQ:AAPL). Apple held its World Wide Developers Conference (WWDC) in June 2023 and the event saw the first new product from the company in years. The Apple Vision Pro is a computer in a headset, or what Apple calls ‘Spatial Computing’. At the heart of this remarkable gadget is AI’s close cousin, machine learning. Machine Learning is used as part of the headset’s Persona feature that scans a user’s face and creates a virtual representation for features such as video calling. Additionally, it also uses complex algorithms to track a user’s eyes during use. Apart from Apple, he couldn’t stop gushing about Meta Platforms, Inc. (NASDAQ:META) either and thinks that it will be one of the biggest beneficiaries of the consumer facing side of AI.
However, while Apple’s busy being Apple, Mr. Gerstner’s favorite stock for artificial intelligence is NVIDIA Corporation (NASDAQ:NVDA). In his previous talk with CNBC, which came after NVIDIA’s stunning results for its first quarter of fiscal year 2024, he shared:
One of the most difficult things about the investment game is behavioral lock in, right. It is making a decision today based upon a failure or success yesterday. And everyday you have to take a first principles approach, you have to take a bottoms up with all the new knowledge that you now possess as to what you should do today. So as we sit here today, you know there are just some significant things I think that you have to take into account. Number one, at the start of the year the consensus estimate among all of the world’s best sell side analyst on NVIDIA was that it was going to have negative data center growth in Q1, and zero to ten percent data center growth for the year.
As of yesterday, the company has told us it’s going to be closer to ninety or a hundred percent growth. So if you’re playing at home, don’t feel be bad. The people who do this for a living, on January 1st, thought that it was going to have negative data center growth. So we’re early in this AI transition; the company is clearly repriced, but knowing what we know now, the price that the company had on January 1st made no sense, the price in December made no sense. As I came on your show and said in December and January. So, as I look at it today, the stock’s trading at you know, yesterday was trading at roughly 65 times earnings, today it’s trading close to 55 times earnings. Previously it was trading at you know at something like you know 42 times next year, 2025 consensus or 52 times. Now it’s trading at 42 times. So take into account the information today, this is not a fad, AI is not a fad. Every enterprise is going to have to re architect around this. And what we’re seeing in terms of their numbers, I think is the leading edge of the AI wave.
So, what stocks are on Mr. Gerstner’s mind? Well, we’ll look at his portfolio today, and some top picks are Meta Platforms, Inc. (NASDAQ:META), Snowflake Inc. (NYSE:SNOW), and Microsoft Corporation (NASDAQ:MSFT).
Our Methodology
To compile our list of Brad Gerstner’s top stock picks, we looked at his portfolio for the first quarter of 2023. If you want a deep dive into artificial intelligence stocks, be sure to check out 15 Best Artificial Intelligence (AI) Stocks To Buy.
How to Play The AI Boom And NASDAQ Rally According To Hedge Fund Manager Brad Gerstner
10. GitLab Inc. (NASDAQ:GTLB)
Mr. Gerstner’s Q1 2023 Investment: $20.9 million
GitLab Inc. (NASDAQ:GTLB) is a technology company headquartered in San Francisco, California. The firm operates a developer platform that enables firms to speed up their deployment times.
By the end of this year’s first quarter, 41 of the 943 hedge funds part of Insider Monkey’s database had held a stake in GitLab Inc. (NASDAQ:GTLB). The firm’s largest investor is Mick Hellman’s HMI Capital with a $164 million stake.
Along with Snowflake Inc. (NYSE:SNOW), Meta Platforms, Inc. (NASDAQ:META), and Microsoft Corporation (NASDAQ:MSFT), GitLab Inc. (NASDAQ:GTLB) is a top Brad Gerstner stock pick.
9. Okta, Inc. (NASDAQ:OKTA)
Mr. Gerstner’s Q1 2023 Investment: $21.5 million
Okta, Inc. (NASDAQ:OKTA) is an identity management platform provider. It allows firms to create a repository of identities and data to secure access to their platforms. Okta, Inc. (NASDAQ:OKTA) is headquartered in San Francisco, California.
Insider Monkey’s first quarter of 2023 survey covering 943 hedge funds revealed that 58 had bought the firm’s shares. Out of these, Okta, Inc. (NASDAQ:OKTA)’s largest hedge fund shareholder is Ricky Sandler’s Eminence Capital with a $128 million investment.
8. Alphabet Inc. (NASDAQ:GOOG)
Mr. Gerstner’s Q1 2023 Investment: $117 million
Alphabet Inc. (NASDAQ:GOOG) is one of the largest technology companies in the world and a key player in the artificial intelligence market with a large research division and its own conversational chatbot.
After digging through 943 hedge funds for their Q1 2023 portfolios, Insider Monkey discovered that 155 had invested in Alphabet Inc. (NASDAQ:GOOG). Ken Fisher’s Fisher Asset Management is its largest investor owning 42 million shares that are worth $4.3 billion.
7. Roblox Corporation (NYSE:RBLX)
Mr. Gerstner’s Q1 2023 Investment: $128 million
Roblox Corporation (NYSE:RBLX) is one of the key players in the metaverse space as it operates a 3D digital world that enables users to interact with each other and explore a digital universe.
37 of the 943 hedge funds part of Insider Monkey’s database had bought the firm’s shares as of March 2023. Out of these, the firm’s largest shareholder is Catherine D. Wood’s ARK Investment Management with a $406 million stake.
6. NVIDIA Corporation (NASDAQ:NVDA)
Mr. Gerstner’s Q1 2023 Investment: $205 million
NVIDIA Corporation (NASDAQ:NVDA) is one of the largest semiconductor firms in the world. Its products are at the heart of the artificial intelligence revolution and are responsible for running the training models on which AI’s responses and outputs are based.
After sifting through 943 hedge funds for their Q1 2023 shareholdings, Insider Monkey found that 132 had invested in NVIDIA Corporation (NASDAQ:NVDA). Out of these, the largest investor is Ken Fisher’s Fisher Asset Management with a $2.7 billion investment.
Meta Platforms, Inc. (NASDAQ:META), NVIDIA Corporation (NASDAQ:NVDA), Snowflake Inc. (NYSE:SNOW), and Microsoft Corporation (NASDAQ:MSFT) are some NASDAQ and NYSE stocks on Brad Gerstner’s AI radar.
Click to continue reading and see Brad Gerstner’s Top 5 Stock Picks.
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Disclosure: None. How to Play The AI Boom And NASDAQ Rally is originally published on Insider Monkey.
