Billionaire Bill Ackman Just Sold 25% of His Stake in This Big Tech Giant for 2 AI Rivals

Key Points

• Microsoft is proving itself to be an AI winner, while Meta is using AI to drive growth.

• Amazon is hitting on all cylinders and seeing its cloud revenue growth accelerate.

• Alphabet looks positioned to be a long-term winner in artificial intelligence.

• 10 stocks we like better than Microsoft ›

Bill Ackman is one of the world’s most renowned investors. The billionaire hedge fund manager runs a very concentrated portfolio of fewer than 15 stocks, so when he makes moves, investors take notice. While he added new positions in credit card networks Visa and Mastercard, financial intelligence company S&P Global, and video streamer Netflix, those weren’t his only notable moves.

During the quarter, he made some big moves with stocks of hyperscalers (owners of large data centers). Ackman finished selling off his remaining small Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) stake, while slashing his position in Amazon (NASDAQ: AMZN) by 25%. He also added to his positions in Microsoft (NASDAQ: MSFT) and Meta Platforms (NASDAQ: META).

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Let’s take a closer look at these hyperscaler stocks to see if investors should follow suit.

Microsoft

Microsoft is Ackman’s third-largest holding, and he upped his position by nearly 10% in the second quarter. It’s easy to see why the legendary investor likes the stock. Even after a recent jump, the stock has done very little over the past year despite continued strong operational performance.

The worry is that AI will disrupt its core software business, while some investors have questioned the economics of AI-focused cloud computing in general and Microsoft’s heavy ties to OpenAI. However, Microsoft’s software is deeply embedded in enterprises, and the increasing adoption of its AI copilots shows that the company is becoming an AI winner.

Meanwhile, its Azure cloud computing unit continues to put up outstanding growth and has a huge backlog. This is a stock to own for the long term.

Meta Platforms

Meta is a top growth stock trading at a very attractive valuation, with a forward price-to-earnings (P/E) of just 15 times 2027 analyst estimates. While investors have frowned at its AI infrastructure spending, few companies have been as good at employing AI to drive growth in their core business as Meta.

Ackman likes the company for its great flywheel business, where continued AI improvements to its algorithms lead to users staying on its apps longer and advertisers being better able to connect with them. This is leading to both increasing ad impressions and increasing prices, which is driving strong growth for the company. Meanwhile, Meta has started to make some impressive strides with the release of its recent AI models.

This is a stock to buy while it remains cheap.

Amazon

While Ackman cut his stake in Amazon by a quarter, it remains his fifth-largest position. However, this is not a stock I’d personally be looking to trim. The company is currently firing on all cylinders, and the stock remains relatively cheap both from a historical standpoint and compared to some of its brick-and-mortar retail peers, like Costco Wholesale and Walmart.

The company’s e-commerce business just continues to deliver solid revenue growth. More impressively, it’s seeing tremendous operating leverage from its internal investments in AI and robotics, as well as its high-margin sponsored ad business. At the same time, its cloud computing business is seeing accelerating revenue growth, backed by partnerships with Anthropic and OpenAI. Amazon is spending aggressively to increase capacity, and its custom chip business helps give it a cost advantage.

The company is getting a strong locked-in return on these investments, and management thinks Amazon Web Services can become a $1 trillion revenue business in the future. This is a stock I’d continue to buy at current levels.

Image source: Getty Images.

Alphabet

After he cut most of his position in the first quarter, it was not surprising to see Ackman completely exit Alphabet in Q2. However, this is a stock I really like.

The company is the most complete AI player, and it has several big advantages. This includes its custom Tensor Processing Units (TPUs), which are the most powerful custom AI chips out there, giving it a big cost advantage for inference and training its AI models. It also has a huge distribution edge through its ownership of Chrome, Android, and its search revenue-sharing deal with Apple, while its powerful global ad network is helping it monetize AI better with consumers than most AI model companies.

Alphabet is well-positioned to be an AI leader over the long haul, and it’s a stock I’d want to continue to own.

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Geoffrey Seiler has positions in Alphabet, Amazon, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, Mastercard, Meta Platforms, Microsoft, Netflix, S&P Global, Visa, and Walmart. The Motley Fool has a disclosure policy.