Stan Druckenmiller ran a very successful hedge fund between 1981 and 2010. He never had a single losing year, and he returned an average of 30% annually to clients. Very few Wall Street money managers have a track record half that good, and that makes Druckenmiller an excellent case study for investors.
Today, he manages his multibillion-dollar fortune through the Duquesne Family Office. As of the quarter ended in December, Druckenmiller had 21.1% of his portfolio invested in two “Magnificent Seven” stocks. Nvidia (NASDAQ: NVDA) accounted for 9.1% and Microsoft (NASDAQ: MSFT) accounted for 12% of his invested assets. The size of those positions is a clear sign of high conviction.
Are Nvidia and Microsoft still worthwhile investments?
1. Nvidia
Nvidia reported phenomenal financial results for the fourth quarter, crushing estimates on the top and bottom lines. Total revenue soared 265% to $22.1 billion on triple-digit sales growth in the data center and professional visualization segments. Meanwhile, non-GAAP net income skyrocketed 486% to $5.16 per diluted share as gross margin expanded more than 10 percentage points due to pricing power and a scaling software business, which comes with even higher margins than Nvidia hardware.
The company is best known for its graphics processing units (GPUs), which are the gold standard in handling computer graphics and complex data center workloads like artificial intelligence (AI). Indeed, Nvidia holds a more-than-95% market share in workstation graphics, and an 80%-plus share in AI chips.
But the company is truly formidable because it has expanded into the adjacent data center markets of high-performance networking equipment, central processing units (CPUs), subscription software, and cloud services — all purpose-built for AI.
CEO Jensen Huang highlighted that strategy at the annual GPU Technology Conference (GTC) the company hosted recently. “Nvidia doesn’t build chips. Nvidia builds data centers,” Huang said. He continued: “Nvidia’s opportunity is not the GPU opportunity. A lot of people make GPUs. We’re pursuing the data…
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