2 Stocks to Buy That Stanley Druckenmiller Added While Exiting 5 Chip and Photonics Stocks
I'm LongbridgeAI, I can summarize articles.Stanley Druckenmiller's Duquesne Family Office exited five chip and photonics stocks (Micron, Intel, Broadcom, Lattice, Coherent) while significantly increasing positions in Amazon and Alphabet. The portfolio grew from $3.4 billion to $5.2 billion. This move reflects a shift toward AI infrastructure demand drivers rather than a retreat from semiconductors, as the firm retained other chip holdings like TSMC and AMD. Amazon and Alphabet are major buyers of chips with substantial capital expenditure plans for AI build-out.
Stanley Druckenmiller's Duquesne Family Office filed its second-quarter 13F with the SEC on Friday, and the sell list looks like a verdict on semiconductors. Five chip and photonics companies -- Micron Technology, Intel, Broadcom, Lattice Semiconductor, and Coherent -- were in the portfolio at the end of March.
By the end of June, all five were gone.
But the same filing shows what he bought. Among the quarter's biggest additions were Amazon (AMZN -0.71%) and Alphabet (GOOG -0.05%)(GOOGL +0.06%), two of the biggest buyers of chips in the world.
The filing grew, too. Reported holdings swelled from about $3.4 billion to $5.2 billion, and the position count climbed from 70 to 95.
Of course, a 13F is a snapshot of quarter-end holdings. It doesn't reveal when the trades happened, whether one sale funded another, or what the firm has done since June 30. But the pattern across this filing is hard to miss, and I think it's worth a closer look.
Image source: Getty Images.
1. The Amazon stake grew more than 1,000%
Duquesne didn't add to Amazon so much as rebuild the position. The firm held 45,800 shares at the end of March. Three months later, it held 541,600 -- an increase of more than 1,000%. At June 30 prices, that stake was worth about $129 million, or about 2.5% of reported holdings.
The filing also shows call options (contracts that can magnify the gain if the stock rises) on another 459,300 shares of the e-commerce giant, representing about $109 million of underlying stock at quarter-end prices. Duquesne more than doubled that position during the quarter.
Together, the shares and calls come to roughly $239 million of underlying Amazon stock. That would place Amazon among the portfolio's largest bets, though still well behind top holding Natera, a diagnostics company that alone accounts for about 17% of reported holdings.
Whatever prompted the buying, the business has since backed it up. In its July 30 report, Amazon said revenue growth in its cloud computing unit accelerated to 37% year over year in the second quarter, its fastest rate in 18 quarters. And CEO Andy Jassy lifted this year's capital spending plan to about $220 billion, up from the $200 billion the company guided to in February.
NASDAQ: AMZN
Key Data Points
2. A brand-new Alphabet position
Alphabet wasn't in Duquesne's portfolio at the end of March. The new stake (336,300 Class A shares, worth about $120 million at June 30) landed at about 2.3% of holdings.
Alphabet has since reported a quarter that fits the theme. The search giant said on July 22 that its second-quarter capital expenditures doubled year over year to $44.9 billion, and it raised its full-year spending plan to between $195 billion and $205 billion, a step up from the prior $180 billion to $190 billion range.
Those two spending plans have something in common that nothing on the sell list shares. Amazon and Alphabet write the checks for the artificial intelligence (AI) build-out. The five companies Druckenmiller sold are all trying to win a share of those checks.
NASDAQ: GOOGL
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He didn't actually leave chips
The exits look even less like a retreat next to the rest of the filing. In the same quarter Duquesne sold those five names, it opened two new semiconductor positions: Advanced Micro Devices at 72,900 shares and chip-equipment maker Lam Research at 43,600 shares.
Not only did the firm keep Taiwan Semiconductor Manufacturing, but it also added to it. The stake ended June among the portfolio's biggest, at 5.4% of reported holdings, up from 5% in March. STMicroelectronics sits close behind at about 4.5%, up from 2.7%.
Druckenmiller didn't sell out of semiconductors. He sold five specific names and kept the ones sitting closest to the center of the AI build-out.
So what do Amazon and Alphabet have that the five sold names don't? The demand. The two companies' capital budgets this year total more than $400 billion, much of it aimed at AI infrastructure. And both increasingly design critical silicon themselves. Amazon's in-house chip business has passed a $25 billion annual revenue run rate, and Alphabet's cloud unit sells systems built on its own TPU chips. A component supplier has to win its spot again in every product cycle, and the companies placing the orders don't.
Overall, I'd resist reading a quarter-end snapshot as a forecast. The positions are moderately sized and already seven weeks old, and a trader this active may have moved on from some of them. Still, the shape of the quarter says something coherent. He sold five companies that sell into the AI build-out and bought two of the biggest buyers funding it. As a signal of where he thinks the durable part of the AI trade lives, this filing is arguably as clear as a 13F can get.