Ackman Cuts Amazon, Boosts Microsoft and Meta Stakes

Billionaire hedge fund manager Bill Ackman is one of the world's most renowned investors. He runs a highly concentrated portfolio of fewer than 15 stocks and is willing to make big bets on stocks he believes in.

Last quarter, Ackman sold a quarter of his Amazon (AMZN +1.94%) stake while betting big on two other AI names: Microsoft (MSFT +0.65%) and Meta Platforms (META +0.57%). Let's take a closer look at each stock to see if investors should follow suit.

Amazon

While Ackman significantly trimmed his stake in Amazon, it remained one of his largest holdings. Whether he will keep selling shares is unknown, but I think Amazon remains one of the best stocks to own.

Amazon is the largest cloud computing company on the planet, and it sees a path toward $1 trillion in cloud revenue. It gets a payback on its AI server and networking investments within two to three years, and I suspect it can reduce that as it leans more on its own chips. AWS is a booming business with the company investing aggressively, and it should see strong, accelerating growth over the next few years.

Key Data Points

At the same time, Amazon's e-commerce business remains strong, with solid revenue growth as well as nice operating leverage stemming from its investments in AI and robotics. Its high-gross-margin sponsored ad business is also growing quickly, and it's become one of the largest digital ad platforms in the world.

To me, the combination of cloud and e-commerce growth makes Amazon a buy for the long term.

Microsoft

While Ackman was trimming his stake in Amazon, he was adding to his position in Microsoft. This turned out to be a smart move, as Microsoft stock soared in late July after the company reported strong fiscal fourth-quarter results. Nonetheless, the stock has still been around breakeven over the past year and year to date.

Key Data Points

Like Amazon, Microsoft has an attractive cloud computing business that is growing quickly. It has close ties with and a 27% ownership stake in OpenAI, which also comes with some massive cloud commitments over the next several years. The company is a bit behind with custom chips and developing its own model, but it is working to improve its situation and has time to do so given its close relationship with OpenAI.

Meanwhile, the company's enterprise software business continues to see strong growth, led by increasing adoption of its AI assistant Copilot. This is helping shift the narrative from the company being an AI loser to a big AI winner in the software space. Given its positioning in these markets, this is still a stock you want to own, even after its post-earnings jump.

Meta Platforms

Ackman was also increasing his stake in Meta Platforms in Q2. The billionaire investor has praised Meta's platform as being the perfect flywheel for AI, and this has certainly been playing out in its numbers. The company is using AI to improve its content recommendation engine, which in turn is keeping users on its sites longer and allowing Meta to serve them more ads.

At the same time, it is providing advertisers with AI-based tools to improve ads and better target and convert users into customers, which is leading to higher ad prices. In Q2, this led to a 14% increase in ad impressions and a 12% jump in ad prices.

Key Data Points

With the company's new AI Muse agent, it is also looking to become the premier company in consumer agentic AI. People can use Meta's agents to help with things like writing emails, planning and booking trips, cutting bills, and shopping. While it has free and paid plans, the big opportunity is getting affiliate and transaction fees for its role in purchases. The agent could also help the company start to monetize its huge Facebook Marketplace.

Meta's stock is down over the past year, but it increasingly looks like it will become a big AI winner, making it a buy.