Hedge funds piled into these A.I. stocks during the first quarter

Published Sun, May 21 20238:10 AM EDT

Major investors including David Tepper and Bill Ackman scooped up companies capitalizing on the artificial intelligence arms race during the first quarter. So far this year, any stock tangentially connected to AI experienced a runup in value, with many popular names providing a long overdue lift to the overall market. Meta Platforms and Nvidia shares have more than doubled in 2023, while chatbot competitors Microsoft and Alphabet have surged at least 32% each. It's been a big turnaround after the big beating many tech stocks suffered in 2022. Securities filings released this week signaled that many hedge funds also appear to be catching the AI bug. Betting on AI heavyweights Alphabet popped up as one of the most common AI plays among big investors in the first quarter. Appaloosa Management's Tepper increased his bet on the search giant by about 6%, while Pershing Square's Bill Ackman and Third Point's Dan Loeb unveiled new positions equaling about $1.1 billion and $493 million, respectively. D1 Capital's Dan Sundheim modestly increased his Alphabet stake, while Baupost's Seth Klarman grew his position by about 47%. Elsewhere, Coatue Management's Philippe Laffont built a $645 million position, and doubled his wager on AI-beneficiary Microsoft. Tiger Cub Chase Coleman hiked positions in both AI beneficiaries. About a week after calling AI an "impactful" technology at the Sohn Conference, securities filings showed Stanley Druckenmiller snatched up $210 million worth of Microsoft in the first quarter. The billionaire investor, who runs Duquesne Family Office, also amassed a $91 million position in Alphabet. Tepper and Tiger Global's Chase Coleman also boosted positions in the software giant. The tech behemoths battling it out for AI dominance have benefited handsomely this year as investors piled money into the booming tech movement. Microsoft bet billions on AI capabilities, funneling another multibillion-dollar investment in January into ChatGPT maker OpenAI. Alphabet launched competing chatbot Bard in the first quarter. Some investors viewed the move as a bid to play catch up to Microsoft. Beyond Alphabet and Microsoft Outside heavyweight giants Alphabet and Microsoft, many hedge funds beefed up other AI-related holdings in the first quarter. That included leading AI chipmakers Nvidia and Advanced Micro Devices . Both Tepper and Tiger Global's Coleman made fresh bets on Nvidia, while Third Point opened a position in Advanced Micro Devices. Druckenmiller grew his stake in Nvidia by 36%, while Laffont beefed up positions in Nvidia and AMD. His Nvidia bet equaled roughly $1.4 billion at the end of March. NVDA YTD mountain Nvidia shares in 2023 Both companies, responsible for making graphics processing units underpinning many AI creations, benefited from this year's AI mania. Nvidia's surged 114%, dwarfing Advanced Micro Devices' 63.4% gain. Many investors say AI tailwinds justify Nvidia's steep valuation and recent share boom. Outside chip stocks, Laffont unveiled a position in AI software C3.ai . Its shares are up 126% this year. Tepper boosted his bet on Meta Platforms by 22%, while Sundheim opened a new stake in the Facebook parent. Coatue more than doubled its position to $1.7 billion. The recent AI beneficiary surged this year as management refocused on efficiency and costs cuts . Meta first openly discussed its custom AI chips ahead of a virtual event Thursday. Some big investors did reduce exposure to prominent AI players. In fact, Keith Meister's Corvex Management slashed positions in Alphabet and Microsoft, while D1 Capital cut its Microsoft stake by 48% and liquidated Nvidia. Baupost dissolved its Meta bet. All of these positions reflect holdings as of the quarter's end and don't reflect any actions taken since then. — CNBC's Yun Li contributed reporting