In the high-stakes world of technology investing, the smart money is pivoting towards the future of artificial intelligence. A new wave is taking shape as billionaire investors ditch previously hot semiconductor stocks and double down on the software companies positioned to dominate AI.
The seismic shift follows a dizzying rally in chip maker Super Micro Computer Inc, whose shares skyrocketed over 850% in the last year due to surging demand for its AI-optimized servers from data centers. But as quickly as those gains accumulated, prominent billionaire funds like Point72 Asset Management, Citadel Advisors and Millennium Management cashed out hundreds of millions worth of Super Micro stock in the fourth quarter.
Their sale proceeds are being redeployed into a carefully curated portfolio of AI software leaders better positioned for sustainable long-term growth. Industry titans like Alphabet, Amazon, Apple and upstarts like OpenAI have captured the imagination – and capital – of the world’s most legendary investors.
“The big money recognizes that while chips are an essential part of the AI revolution, the true disruption and scalable revenue streams will come from software and cloud services,” said BrÃam MartÃnez, lead AI analyst at Founders Equity Research. “Semiconductors are volatile products with intense competition. The platform giants are where the smart money is flowing for good reason.”
At the vanguard of this great AI migration is billionaire hedge fund titan Steven A. Cohen and his Point72 team. Their latest 13F filing with regulators shows a combined sale of over 255,000 Super Micro shares valued at approximately $28 million based on year-end prices. Simultaneously, Point72 invested over $151 million into e-commerce juggernaut Amazon and nearly $35 million into Dell Technologies’ diversified AI services.
Amazon’s cloud computing arm AWS has rapidly emerged as a leading provider of generative AI tools for enterprise customers seeking to implement the transformative technology. AWS clients can access customized language models, code assistants, and a swath of other cutting-edge AI applications. For its part, Dell offers a hybrid cloud infrastructure integrating AI acceleration hardware and software from partners like Nvidia.
Cohen is far from alone in his shift from semiconductor manufacturing toward big tech’s AI wagers. Ken Griffin, the billionaire manager of $56 billion Citadel fund complex, slashed his fund’s Super Micro investment by over 55% last quarter. But the chip stock sale paled in comparison to Citadel’s simultaneous $1.2 billion purchase of Nvidia shares and a stunning $1.1 billion investment into semiconductor rival AMD.
While Nvidia has been one of the biggest champions and beneficiaries of the AI gold rush thanks to its leadership in powerful AI-optimized graphic chips, AMD is making an aggressive push of its own. The company released its first dedicated AI chip called MI300X last year, aiming to loosen Nvidia’s grip on data center spending. Only time will tell which chipmaker will reign supreme in the AI hardware arena.
Perhaps most notably, Israel Englander’s $42 billion Millennium Management completely bailed on its Super Micro position while initiating new stakes in AI juggernauts Alphabet and Apple worth over $4.6 billion combined.
Alphabet’s wildly profitable Google remains the dominant gateway to the internet, capturing over 92% of global search traffic and serving as the entry point for billions into AI services. The company’s cloud AI offerings give businesses and developers tools to build customized AI models tailored to their specific needs leveraging Google’s in-house language technologies. AI has been deeply integrated across Google’s entire suite of market-leading products like Gmail’s Smart Compose text predictions.
Not to be outdone, Apple is driving its own AI disruption on the consumer products front. Advanced language AI powers its new virtual assistant Claude as well as predictive text features on iPhones and other devices. Apple has staked much of its future on recurring subscription services like fitness and entertainment to complement its hardware sales. Seamless AI integration between devices and cloud services is paramount for enticing users into Apple’s prosperous ecosystem.
“The rhetoric around AI has been circulating for years, but we’re finally reaching a tipping point of commercialization and adoption at scale,” said Malinka Waltz, director of Gartner’s AI practice. “The major tech platforms are monetizing their sci-fi innovations, leveraging networks effects, and barreling toward sustained hyper growth from AI.”
The Game of Economic Supremacy
Undergirding the reallocation of billionaire capital toward big tech’s AI wagers is a burgeoning global battle for economic and technological supremacy. National governments have made prioritizing public and private AI investment a cornerstone of maintaining competitive advantages.
The United States and China are leading the charge with ambitious projects pouring billions into AI research and product development. Congress’ recently passed legislation committing over $200 billion in funding for domestic semiconductor production and breakthrough technologies like AI.
In turn, US-based firms have aggressively recruited elite AI talent, giving them a head start over international competitors. DeepMind, the AI research division of Alphabet, has scored numerous high-profile wins including solving a 50-year-old protein structure problem. OpenAI’s ChatGPT has become a viral phenomenon and spurred Microsoft to pour $10 billion into industrial-scale AI systems.
Critically, America’s AI ecosystem has attracted unprecedented investment from the biggest private investors. Recent estimates suggest that Artificial Intelligence companies raised over $9 billion just in the fourth quarter across private startup rounds and the public markets.
Not to be outdone, the Chinese government elevated AI development to a top national priority over five years ago. Beijing views mastering AI technologies as key to surpassing US economic and military dominance. China aims to cultivate a domestic AI industry rivaling Silicon Valley and produce chips powering AI systems that can supplant Western imports.
China’s national strategy has sparked meteoric growth in the country’s AI startups as venture funds and government subsidies flood the sector. Over 19,000 AI companies populate the domestic industry with over $7 billion in disclosed funding last year alone. In a symbolic shift, e-commerce giant Alibaba’s research labs unveiled their own next-generation AI system potentially rivaling ChatGPT and OpenAI’s DALL-E.
“AI has taken on geopolitical dimensions extending far beyond commercial potential. It’s now a source of international prestige, economic leverage and strategic supremacy,” said Waltz. “We’re leaving the era of theoretical AI and racing toward real-world manifestations that will rewrite industries and tip global power structures.”
As the AI revolution catalyzes a 21st century technological Space Race, the smart money is placing its bets accordingly. Billionaires’ latest moves affirm a single truth – the future will be shaped by bleeding-edge AI software and the internet’s reigning platforms. Those hedging their wagers on yesterday’s semiconductor cycle may be sowing the seeds of their investing demise.
