Stanley Druckenmiller is one of the world’s most followed billionaire investors. He organized George Soros’s famous bet against the British pound in 1992 and generated an average annual return of 30% for his hedge fund Duquesne Capital for three decades after its launch in 1986.
Druckenmiller retired in 2010 and closed his fund, but continues to manage $3.1 billion in assets through his own Duquesne Family Office. Many investors are still keeping a close eye on the company’s portfolio to see what Druckenmiller is optimistic about.
As of this writing, two “Magnificent Seven” stocks are – Microsoft (NASDAQ:MSFT) And Nvidia (NASDAQ:NVDA) – are among the Duquesne Family Office’s top investments. Microsoft is the largest holding with 13.1% of its portfolio, while Nvidia is in third place with 9.8%. Currently, Microsoft and Nvidia’s unrealized profits are 43% and 341%, respectively.
Why is Stanley Druckenmiller bullish on Microsoft?
Druckenmiller will begin purchasing additional Microsoft shares in early 2023. These purchases coincided with the explosive growth of its AI-focused businesses.
When Satya Nadella took the helm as Microsoft’s third CEO in 2014, he placed great emphasis on expanding its cloud and mobile businesses. Over the next decade, the company converted many of its desktop-based applications into cloud-based services, grew Azure into the world’s second-largest cloud infrastructure platform, and introduced more mobile applications for iOS and Android rather than trying to develop its own mobile ones Platform.
But over the past five years, Microsoft has also increased its investment in OpenAI, the developer of generative AI tools like ChatGPT and DALL-E. The company integrated these tools into its own cloud-based search, productivity and infrastructure services.
By integrating OpenAI tools into Azure, Microsoft was able to grow much faster than its larger competitor. Amazon Web Services (AWS) last year. The integration of these generative AI tools into the Bing search engine and office productivity software also threatened to cause disruption alphabetis Google’s expansive ecosystem of cloud-based search and productivity services. That’s probably why Druckenmiller sold all of his shares in Amazon and Alphabet at the end of 2023, while also buying more shares in Microsoft.
Analysts expect Microsoft’s revenue and adjusted earnings per share (EPS) to rise 8% and 11%, respectively, in fiscal 2024 (ending in June). For fiscal 2025, they expect revenue and adjusted earnings per share to increase 14% and 15%, respectively. The stock isn’t exactly cheap at 31 times forward earnings, but it remains one of the easiest ways to invest in the booming AI services market.
Why is Stanley Druckenmiller bullish on Nvidia?
Druckenmiller also opened a position at Nvidia in early 2023. During a conference in June, he explained that he could own Nvidia for “two or three more years” – and maybe even longer – as AI becomes as “innovative as the Internet.” “
This statement isn’t too surprising since Nvidia is the leading manufacturer of high-end data center graphics processing units (GPUs) for processing complex AI tasks. The chipmaker generated a whopping 78% of its revenue from these data center GPUs in fiscal 2024 (which ended in January this year), and market demand still far outstrips its supply.
In fiscal 2024, Nvidia’s revenue rose 126%, while adjusted earnings per share rose 288%. For the 2025 financial year, analysts expect sales to increase by 82% and 89%, respectively. Those are incredible growth rates for a stock that trades at 34 times forward earnings.
Nvidia could eventually face competition from cheaper data center GPU makers AMD, first-party chips from data center giants like Microsoft and other types of dedicated AI accelerator chips. But for now, the company remains the leading provider of picks and shovels to the AI gold rush — and there could still be plenty of room for growth.
Druckenmiller significantly reduced his stake in Nvidia in the second half of 2023, but also bought additional call options on the stock. These moves suggest he is taking some profits after Nvidia’s historic success, but remains optimistic about its long-term prospects.
Should you follow Druckenmiller’s lead on these two AI stocks?
According to Fortune Business Insights, the generative AI market could grow at a compound annual growth rate (CAGR) of 40% from 2023 to 2030. This secular expansion could light a raging fire under Microsoft’s AI-powered cloud services and Nvidia’s GPUs — so it’s smart to follow Druckenmiller’s lead and buy these two high-flying “Magnificent Seven” stocks today.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun has positions at Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft and Nvidia. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.
Get to know the two “Magnificent Seven” stocks Stanley Druckenmiller is betting on the most. The book was originally published by The Motley Fool