Billionaires are selling Nvidia shares and buying these two artificial intelligence (AI) stocks instead.

Yet, Nvidia is one of the biggest winners of the artificial intelligence (AI) boom. The company’s shares surged 173% last year as the company reported unprecedented demand for its GPUs, or graphics processors, the chips that power all the most advanced artificial intelligence systems.

However, some billionaire hedge fund managers reduced their positions in Nvidia in the first quarter by buying shares of two other AI companies: Amazon (NASDAQ: AMZN) AND Sales team (NYSE: CRM).

• Israel Englander of Millennium Management sold 720,004 shares of Nvidia, reducing his holdings by 35%. Meanwhile, he increased his positions at Amazon and Salesforce by 32% and 36%, respectively. These stocks are among his largest and twelfth largest assets, respectively, excluding options.

• Louis Bacon of Moore Capital Management sold 2,006 shares of Nvidia, reducing his stake by 19%. He also increased his stake in Amazon by 18% and opened a new position at Salesforce. These stocks are among his largest and sixth largest assets, respectively, excluding options.

• Philippe Laffont of Coatue Management sold 2,937,060 shares of Nvidia, reducing his stake by 68%. Meanwhile, it increased its position in Amazon by 3% and doubled its stake in Salesforce. These stocks are his second and fourth largest portfolio.

Investors should not interpret these transactions as a bad investment by Nvidia. All three hedge fund managers still own shares in the chipmaker. But Amazon and Salesforce deserve further consideration. Here are the important details.

1. Amazon

Amazon operates the largest online platform in North America and Western Europe by gross merchandise sales, and its strength in retail has allowed the company to build a thriving digital advertising business. Amazon is the largest retail media company in the United States and the third largest advertising technology company in the world. Meanwhile, Amazon Web Services (AWS) is the market leader in terms of revenues from cloud infrastructure and platform services.

Amazon uses artificial intelligence (AI) to create monetization opportunities and increase efficiency in its various businesses. In e-commerce, it recently announced an AI generative shopping assistant called Rufus that will help consumers find and compare products. Amazon also debuted a generative AI assistant for sellers that streamlines the creation of product pages. Finally, the company uses artificial intelligence in its logistics operations to manage inventory and optimize delivery routes.

When advertising, Amazon uses machine learning to ensure that consumers see the most relevant ads. This ultimately translates into more effective campaigns for marketers, making Amazon an even more attractive advertising partner. The company also launched a generative AI tool that allows brands to convert product profile photos into lifestyle images.

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On the cloud computing side, AWS is already well-positioned to take advantage of AI given its leadership in cloud infrastructure and platform services, but the company has also introduced new products. Amazon Bedrock is a cloud service that enables brands to customize pre-trained large language models and create generative AI applications. Amazon Q is a conversational assistant that can summarize information and automate tasks such as coding.

Wall Street analysts expect Amazon to grow earnings per share by 24% annually over the next three to five years. This consensus estimate makes the current valuation of 50 times earnings seem relatively reasonable. In fact, Amazon is near its lowest profit level in two years. I would certainly buy AI stock today, and I think patient investors should consider doing the same.

2. Salesforce

Salesforce is the market leader in customer relationship management (CRM) software, with a market share greater than that of its next four competitors combined. The platform combines productivity applications for sales, customer service, marketing and commerce. Salesforce will undoubtedly benefit as core CRM spending increases, but two new products expand its capabilities in the adjacent areas of data management and automation.

First, Data Cloud unifies customer data from internal sources (Salesforce CRM software) and external sources (third-party data platforms) and allows users to activate this data to automate workflows, personalize customer service, and build AI applications. Salesforce CEO Marc Benioff says Data Cloud is the fastest-growing product in the company’s history.

Second, Einstein Copilot is a natural language interface that uses generative artificial intelligence to automate tasks within the CRM platform. For example, Einstein can summarize information and draw meaningful conclusions for sales and customer service teams. It can also help sales teams develop digital storefronts and marketing teams create advertising campaigns.

According to Grand View Research, spending on CRM solutions is expected to grow by 13.9% annually through 2030. In any case, Salesforce should benefit, but mainly because Data Cloud and Einstein Copilot add value to already existing products and create cross-selling opportunities for the Company. Benioff said he believes “the data cloud will become the heart and soul” of the Salesforce CRM platform as companies invest in AI, simply because AI must be rooted in good data to be effective.

Wall Street analysts expect Salesforce to grow earnings per share by 21% annually over the next three to five years. This makes the current valuation of 64.8 times earnings seem quite expensive. Sure, Salesforce may be growing earnings faster than analysts expect, but I’d wait for a cheaper valuation multiple before buying this stock.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Trevor Jennevine holds positions at Amazon and Nvidia. The Motley Fool has positions in and recommends Amazon, Nvidia, and Salesforce. The Motley Fool has a disclosure policy.

Billionaires are selling Nvidia shares and buying these two artificial intelligence (AI) stocks instead, originally published on The Motley Fool