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Billionaire Stanley Druckenmiller Sold Out of Nvidia. He’s Buying This AI Stock Instead.
Stanley Druckenmiller is one of the greatest investors of all time. As the manager of Duquesne Capital Management from 1981 to 2010, Druckenmiller generated an average annual return of 30% and never had a losing year during that time. These days, Druckenmiller is no longer an active fund manager but still manages a portfolio of his own stocks through the Duquesne Family Office. And investors pay close attention to his moves.
That’s why investors took notice when Druckenmiller, who was early to buy shares of Nvidia (NASDAQ: NVDA) in Q4 2022 after ChatGPT launched, dumped most of his stake in the AI chip leader in the first half of this year. At the time, he said that the market now sees in Nvidia what he recognized earlier. In an interview last week with Bloomberg, the Duquesne chief revealed that he had sold his entire stake in Nvidia.
Druckmiller admitted that it was a mistake to sell the chip stock, as Nvidia’s stock price has continued to run up since then. He also said he remained bullish on artificial intelligence (AI), adding, “We’re big long-term believers in AI, and there are still many ways we’re playing AI, particularly the infrastructure that’s been built to support the power needed.”
The AI stock Druckenmiller has been buying
While Druckenmiller has sold all 9.5 million shares of Nvidia he once owned, he’s been accumulating shares of another under-the-radar AI stock. That’s Vistra (NYSE: VST), and it was Duquesne’s third-biggest holding by market value as of the end of the second quarter at $225.7 million.
Druckenmiller first bought the stock in the third quarter of 2023, the same quarter he started to unload his Nvidia stake. Since the end of that quarter, the stock is up 309%, and it’s now the best-performing stock on the S&P 500 this year, having recently passed Nvidia for the title after a recent surge. Year to date, Vistra is up 252%.
Should you follow Druckenmiller into Vistra? Let’s take a look at what this unique AI play has to offer.
What is Vistra?
As Druckenmiller alluded to in the quote above about AI infrastructure, energy is going to play a major role in AI as it takes incredible amounts of power to run AI data centers. That’s where Vistra comes in. The Texas-based company is now the largest competitive (meaning deregulated) power generator in the country, with 41,000 megawatts (MW) of installed generation capacity.
It’s also one of the biggest producers of nuclear energy in the country at 6,400 MW capacity. Following its acquisition of Energy Harbor earlier this year, it now has the second-largest energy storage capacity in the country at 1,020 MW.
The reason why investors increasingly see Vistra as a play on the AI boom is because power demand from data centers is expected to roughly triple from 2023 to 2030, adding 35 gigawatts of power demand in that time. Vistra also sees a number of other growth drivers, including the reshoring of industrial activity, construction of new semiconductor foundries due to the CHIPS Act, and increased electrification needs, including in the Permian Basin where it expects demand to jump by 20 gigawatts by 2030.
That growth explains why investors believe utility stocks like Vistra offer an appealing way to get exposure to the growth of AI.
Is Vistra a buy?
Vistra is a utility company, so it’s still subject to most of the constraints of a utility. However, it has one advantage over other utilities: It operates in unregulated power markets, supplying power at market price, rather than at a price determined by regulators. That’s the way most utilities operate because they’re regulated monopolies.
That gives the business significant upside potential if a supply crunch ensues from the growth of AI and data centers.
Despite that growth opportunity, at this point, Vistra is actually more expensive than Nvidia, trading at a price-to-earnings ratio of 100, though analysts expect profits to ramp up through 2025. Energy prices are notoriously difficult to predict, however.
Announcements this week from Alphabet and Amazon have helped drive nuclear stocks higher. They show that big tech companies are working to secure adequate sources of clean power for their data center needs.
Vistra could fit in an AI portfolio. However, after the recent run-up, I think it makes more sense to wait for a better price to buy the stock.
Druckenmiller seems to agree with that statement. After buying the stock three quarters in a row, he took a break in the second quarter, perhaps thinking that the price had already run up substantially.
Don’t miss this second chance at a potentially lucrative opportunity
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, and Nvidia. The Motley Fool has a disclosure policy.
Billionaire Stanley Druckenmiller Sold Out of Nvidia. He’s Buying This AI Stock Instead. was originally published by The Motley Fool
Sales of existing homes fell in September as house hunters remained on the fence about buying a home despite mortgage rates easing during the month.
Existing home sales slipped 1.0% from August’s tally to a seasonally adjusted annual rate of 3.84 million, the National Association of Realtors said Wednesday. That marked the lowest rate since October 2010. Economists polled by Bloomberg expected a pace of 3.88 million in September.
On a yearly basis, sales of previously owned homes were 3.5% lower in September. The median home price rose 3.0% from last September to $404,500, marking the 15th consecutive month of annual price increases.
“Home sales have been essentially stuck at around a 4 million-unit pace for the past 12 months,” NAR chief economist Lawrence Yun said in a press release.
There have been significant challenges that have weighed on sales activity, including a lack of inventory, escalating prices, and elevated mortgage rates. Last month, however, those factors turned around.
The Federal Reserve cut its benchmark rate by half a percentage point in September. While the central bank doesn’t set mortgage rates, its actions influence their direction of movement.
Mortgage rates hit the lowest level since February 2023 ahead of the Fed decision to ease, while listing inventory picked up.
But overall, that hasn’t been enough to entice buyers.
“Some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election,” Yun said.
Tesla (TSLA) reported mixed third quarter results after the bell on Wednesday, but the stock jumped in after-hours trading as investors cheered the earnings beat, higher gross margins, and news that Tesla’s cheaper EV is on track for production next year.
For the quarter, Tesla reported revenue of $25.18 billion vs. $25.4 billion per Bloomberg consensus, higher than the $25.05 billion it reported in Q2 and also topping the $23.40 billion Tesla reported a year ago. Tesla posted adjusted EPS of $0.72 vs $0.60 expected, on adjusted net income of $2.5 billion and free cash flow of $2.9 billion.
The closely watched gross margin figure came in at 19.8%, much higher than the 16.8% expected.
Tesla shares were up nearly 8% in after hours trade.
“We delivered strong results in Q3 with growth in vehicle deliveries both sequentially and year-on-year, resulting in record third-quarter volumes,” the company said in its earnings deck. “Preparations remain underway for our offering of new vehicles — including more affordable models — which we will begin launching in the first half of 2025.”
Earlier this month, Tesla (TSLA) announced third quarter deliveries that slightly missed expectations, sending the stock lower.
Tesla said it delivered 462,890 vehicles in Q3, up 6.4% quarter over quarter, to mark the first quarter of delivery growth this year. The numbers also came in ahead of the 435,059 EVs the company delivered in the year-ago period. But Wall Street had expected Tesla to deliver closer to 463,897, according to Bloomberg.
“Refreshed Model 3 ramp continued successfully in Q3 with higher total production and lower cost of goods sold quarter-over-quarter. Cybertruck production increased sequentially and achieved a positive gross margin for the first time,” Tesla said in its report.
Tesla said it expects vehicle deliveries to achieve “slight growth” in 2024.
Ahead of Tesla’s Q3 disclosure, shares were down approximately 11% since Tesla revealed its robotaxi, dubbed the Cybercab, at its showy “We, Robot” event from the Warner Bros. studio lot in Burbank, Calif., on Oct. 10.
The debut and release of a cheaper EV is what many analysts and industry watchers believe will spur the next leg higher of EV sales, as even CEO Elon Musk has said before. During its Q2 report, Tesla and Musk said the company remains on track for the production of new vehicles, likely including a cheaper EV, in the first half of next year.
Investors and analysts were left wanting more details from Tesla’s “We, Robot” event on the Cybercab itself and detailed testing plans, along with questions about the development of Tesla’s sub-$30,000 EV, dubbed the Model 2.
Transak disclosed a data breach affecting over 92,000 users after a phishing attack compromised an employee’s laptop.
CryptoCurrency
The Dow plummets more than 600 points and is on track for its worst day in more than a month
The Dow Jones Industrial Average and other major indexes suffered a steep decline Wednesday afternoon as the yield on the benchmark 10-year U.S. Treasury note continued its upward climb, reaching 4.23%—a level not seen since July.
In the afternoon, the Dow dropped 631 points, or 1.4%, heading for its worst day in over a month. Meanwhile, the tech-heavy Nasdaq and the S&P 500 declined by 2.2% and 1.4%, respectively. However, there was some relief for investors as oil prices eased, with West Texas Intermediate (WTI) futures trading around $70.65 per barrel.
The Federal Reserve’s Beige Book, released in the afternoon, reported that economic activity remained largely unchanged across the 12 Federal Reserve Districts, with the Southeast significantly impacted by a harsh storm season.
On Wednesday, all eyes are on Tesla (TSLA) as the company prepares to release its latest earnings report. Analysts expect earnings per share to be 60 cents, down from 66 cents a year ago but an improvement from 52 cents in the previous quarter, according to FactSet estimates. Revenue is projected to hit $25.4 billion, compared to $23.3 billion in the third quarter of 2023 and $25.5 billion in the preceding quarter.
Apart from Tesla, investors are closely monitoring earnings reports from other major corporations, including AT&T (T), Boeing (BA), and Coca-Cola (KO).
McDonald’s stock plunges over 5%
McDonald’s (MCD) shares took a sharp hit, falling over 5% after the Centers for Disease Control and Prevention (CDC) linked the chain’s Quarter Pounder burgers to an E. coli outbreak. The outbreak has led to 10 hospitalizations and one death, driving a significant decline in McDonald’s stock during the afternoon trading session.
As of now, 49 cases have been reported across 10 states between Sept. 27 and Oct. 11, with a majority of illnesses occurring in Colorado, Nebraska, Utah, and Wyoming. The CDC noted that most of those affected had eaten a Quarter Pounder. Investigators are working swiftly to identify the contaminated ingredient.
Spirit Airlines stock soars 30%
After a failed attempt at merging with JetBlue (JBLU-0.80%), ultra-low-cost carrier Spirit Airlines (SAVE+28.01%) is reportedly turning back to a familiar partner. The Wall Street Journal (NWSA-0.34%), citing people familiar with the matter, reports that Spirit and Frontier Airlines (ULCC+3.05%) are in early talks over a potential merger. The news sent Spirit’s stock soaring nearly 30% on Wednesday.
–Francisco Velasquez and Rocio Fabbro contributed to the article
The semi-autonomous region of Tanzania is taking advantage of a sandbox regulatory framework adopted in July.
Bitcoin’s correction ignited selling in altcoins, which are slipping below critical support levels.
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