In mid-November, a significant shift occurred in the portfolio of Viking Global Investors, led by billionaire Ole Andreas Halvorsen, known for his ability to outperform major stock market indexes. With nearly $39 billion in assets under management, Halvorsen made bold moves during the quarter ending September 30, discarding shares in two influential companies while simultaneously elevating another to a top-five position in his fund.
During this period, Halvorsen completely divested from Amazon and Nvidia, two members of Wall Street’s prominent “Magnificent Seven.” He sold all 3,897,092 shares of Amazon, which was previously the fund’s eighth-largest holding, and 3,681,935 shares of Nvidia, previously ranked 26th by market value. These decisions have left many investors speculating about the reasoning behind such sharp moves, particularly as Amazon and Nvidia are commonly held stocks among other billionaires and typical investors.
One explanation for the significant sell-offs may simply be profit-taking. Halvorsen’s strategy indicates a tendency to sell stocks within a timeframe of less than 19 months when favorable conditions arise, suggesting a willingness to capitalize on gains. However, concerns lurk that his reasons may extend beyond straightforward profit motives.
Skepticism around the sustainability of the artificial intelligence boom has grown, as history shows that early-stage innovations often lead to inflated expectations and subsequent downturns. If this trend were to manifest in the AI sector, Nvidia, heavily tied to graphics processing, could be particularly vulnerable.
Valuation concerns may also underlie Halvorsen’s decisions. Nvidia’s price-to-sales (P/S) ratio briefly surpassed 30, a threshold often signaling a potential bubble for high-growth companies. Although Amazon appears affordable based on future cash flow potential, its current price-to-earnings (P/E) ratio of 34 might have raised red flags for Halvorsen and his advisors.
Contrarily, Viking Global did not shy away from investing during this quarter; instead, Halvorsen turned his attention toward another trillion-dollar titan—Microsoft. The firm acquired 2,429,412 shares of Microsoft, a purchase valued at around $1.26 billion, making it the fund’s fifth-largest holding and representing 3.2% of its total assets.
Microsoft’s ambitious strides into artificial intelligence, particularly with its Azure cloud services, may have played a significant role in attracting Halvorsen. Azure’s incorporation of generative AI and large language models has led to impressive growth, particularly with a staggering constant-currency growth rate of 39% reported in Microsoft’s fiscal first quarter.
Despite the prevailing risks associated with an impending AI bubble, Microsoft maintains diverse revenue streams that extend well beyond AI. While its cloud services are becoming increasingly important, legacy segments such as Windows and Office continue to deliver substantial operating cash flow, providing financial stability and resources for investment in growth areas.
With a staggering $102 billion in cash and equivalents at the end of September, Microsoft is positioned well for continued operations, including share buybacks, dividends, and strategic acquisitions. Adding to its appeal, its current forward P/E ratio of 25 offers a notable discount compared to its historical average over the past five years.
As the market continues to grapple with waves of economic data and earnings reports, the moves made by influential investors like Halvorsen underscore the complex and often unpredictable nature of stock investments.
