Over the last two years, there hasn't been a hotter trend on Wall Street than the rise of artificial intelligence (AI). The ability for AI-powered software and systems to become more proficient at their existing tasks, as well as evolve to learn new jobs over time without human intervention, gives this technology a virtually limitless ceiling and broad-based utility in most industries.
Based on one aggressive estimate from the analysts at PwC, the AI revolution can add $15.7 trillion to the global economy by the turn of the decade. This otherworldly addressable market is precisely why AI stocks have soared since the start of 2023.
However, not everyone is sold on the idea that AI stocks are still a bargain. Though quite a few billionaire money managers have profited handsomely from the surge in artificial intelligence stocks over the last two years, some are locking in their gains and heading for the sideline, including Stanley Druckenmiller.
As of the end of September, Druckenmiller was overseeing almost $3 billion in assets under management at Duquesne Family Office, which was spread across 75 holdings. While there are a select few AI stocks Druckenmiller still fancies, he's been sending Wall Street's two most-popular artificial intelligence juggernauts, Nvidia (NASDAQ: NVDA) and Palantir Technologies (NASDAQ: PLTR), to the grinder.
When 2024 began, Duquesne held 6,174,940 shares of AI-graphics processing unit (GPU) company Nvidia, which takes into account its historic 10-for-1 stock split completed following the close of trading on June 7. As of Sept. 30, every share had been sold.
Meanwhile, Druckenmiller's fund sold 728,255 shares of AI-driven data-mining specialist Palantir during the third quarter, which reduced Duquesne Family Office's stake in the company by roughly 95%.
If you're looking for a viable reason why one of Wall Street's most-prominent billionaire investors is dumping shares of two hot AI stocks, simple profit-taking makes sense. Shares of Nvidia and Palantir have respectively gained 172% and 369% year-to-date, as of the closing bell on Dec. 20. These are outsized gains that typically encourage money managers to take some or all of their chips off the table.
The worry for Wall Street and investors is there may be reasons beyond simple profit-taking that have encouraged Druckenmiller and his advisors to abandon ship.
Perhaps the primary concern is that every next-big-thing innovation over the last three decades has followed the same course. Specifically, a period of hype and euphoria followed by a bubble-bursting event. Every big-time innovation since (and including) the advent of the internet in the mid-1990s has needed time to mature.