In the just-concluded fourth quarter, several billionaire investors actively bought shares of a stock that has delivered astonishing gains since its listing. Since its initial public offering, the stock’s cumulative return has exceeded 200,000%, meaning that an initial investment of $10,000 would have grown into an eye-popping $21.3 million today. However, this return was achieved over a holding period of 29 years, meaning investors had to buy in early and hold for the long term.
This mysterious stock is Amazon (AMZN). Despite the tech giant’s incredible gains, billionaire investors appear to believe there is still room for further upside. That is precisely why investors such as Bill Ackman and Stanley Druckenmiller aggressively bought Amazon shares in the fourth quarter.
According to U.S. Securities and Exchange Commission (SEC) regulations, any fund with over $100 million in assets must report its quarter-end holdings within 45 days after the end of each quarter using Form 13F. Therefore, the information currently available is already somewhat dated—these purchases could have occurred as early as October 1 of last year, more than six months ago. Yet today, Amazon’s share price is cheaper than at any time during the fourth quarter. So, if these billionaires saw a good investment opportunity then, they are likely even more bullish now.
Over the past two decades, Amazon has built a vast business empire. Almost everyone has used its e-commerce website to some extent, but far fewer have had direct exposure to its cloud computing platform, Amazon Web Services (AWS). AWS is the real reason to invest in this stock—it is the highest-growth segment of Amazon’s business and contributes more than half of the company’s operating profits.
AWS is also Amazon’s gateway into the artificial intelligence space. The platform is becoming a popular choice for running AI applications, and interest in its custom AI chips is growing rapidly. This segment of AWS is growing at a triple-digit percentage rate, likely because training and running AI models on its Trainium processors costs less than using more common graphics processing units (GPUs). In any case, AWS provides Amazon with an opportunity to participate in one of the largest growth trends in history, making it a compelling stock pick in the AI era.
Amazon’s forward price-to-earnings ratio is currently around 27 times. While not exactly cheap, this valuation is reasonable given that the company is one of the best-performing enterprises in the market. Amazon is a well-established, enduring giant and represents a fairly safe stock pick within the AI investment landscape.
Summary: Despite Amazon’s remarkable long-term stock price appreciation, billionaire investors including Bill Ackman and Stanley Druckenmiller increased their stakes in the company in the fourth quarter of last year. The current share price is even lower than it was then, and with AWS serving as a core growth driver in the AI sector, institutional investors remain optimistic about the stock’s prospects.
