Hedge Funds Buck Trend In AI Investing, Nvidia Not Their First Choice

AI has recently become a dominant topic in business and tech sectors. With its entry into the mainstream largely ignited by the success of OpenAI’s ChatGPT in November 2022, AI has since become a central point of interest for investors, driving valuations and market trends.

Among the most prominent beneficiaries of the trend is C3.ai Inc AI, whose shares have soared more than 223% this year despite its relatively small customer base of just 236 by the end of Q3 in fiscal 2023.

Meanwhile, Nvidia Corporation NVDA, known for its AI-related chips, saw its stock value more than double since the start of the year.

But amidst the hype, some investors have voiced concerns about an impending bubble in AI-associated stocks.

Are the prices soaring too high, too fast? And more interestingly, where are titans of Wall Street — hedge funds — shoring up funds in the emerging and volatile market?

Benzinga looked into the 13F filings for the quarter ended March 31 of 19 leading hedge funds to find out.

Read also: Wall Street’s Wake Up Call: ChatGPT Portfolio Is Outperforming Half Of Top Equity Funds In Week 4

Many of the funds made some notable investments in tech giants that are heavily involved in AI development. Microsoft Corp MSFT, Google’s parent company Alphabet Inc GOOG GOOGL, and Nvidia emerge as the clear favorites.

But which stock do most hold?

Tiger Global Management, a $58.5 billion hedge fund, holds shares of Microsoft, Alphabet and Nvidia.

Similarly, David Tepper's Appaloosa Management has investments in Microsoft and Nvidia.

Voyager Global and Bill Ackman's Pershing Square Holdings put their money on Alphabet, while the Gates Foundation chose to stick with Microsoft, obviously.

Interestingly, a few funds have diversified their tech investments. Philippe Laffont's Coatue Management poured money into Nvidia, Microsoft, Alphabet, Amazon.com, Inc. AMZN, and Netflix Inc NFLX — all of which have strong AI undertones in their operations.

Duquesne Capital Management, another prominent hedge fund, also holds stakes in Nvidia, Microsoft, Alphabet, Advanced Micro Devices, Inc AMD, and Marvell Technology Inc MRVL.

However, amid the wide array of tech investments, one company stands out as the preferred choice of most hedge funds — Microsoft.

With significant investments in cloud computing and AI, Microsoft is drawing the attention of hedge funds more than any other tech company, perhaps due to its $13 billion investment in OpenAI.

Our data suggested that while Nvidia and C3ai have seen impressive gains in their share prices, the majority of hedge funds seem to believe Microsoft offers a more reliable bet in the AI sector.

In the end, though, the AI fervor, just like any other market trend, presents both opportunities and challenges. And while AI stocks might currently be riding the wave of hype, time will tell which companies can translate the enthusiasm into long-term success.

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