Billionaire Seth Klarman of Baupost Group Is Piling Into Dual Industry Leader Amazon and Dumping Shares of a High-Flying Chief Rival

Nothing is more valuable on Wall Street than data -- and investors are rarely hurting for information that can guide their decision-making. Between earnings season and near-daily economic data releases, it's easy for something of importance to fall through the cracks.

For example, Feb. 17 marked the deadline for institutional investors with at least $100 million in assets under management (AUM) to file Form 13F with the Securities and Exchange Commission, and it's possible you missed it. A 13F provides invaluable information on which stocks Wall Street's savviest money managers bought and sold in the latest quarter (in this instance, the fourth quarter).

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Although the recently retired Warren Buffett has long been the most followed of all billionaire asset managers, he's far from the only billionaire known for making waves on Wall Street. Ardent billionaire value investor Seth Klarman of Baupost Group is another highly successful fund manager whom investors pay close attention to.

Klarman closed out 2025 with nearly $5.3 billion in AUM, spread across 22 stocks. However, the story of Baupost Group's latest 13F filing is what Klarman did with two of Wall Street's most influential trillion-dollar stocks. While piling into dual industry leader Amazon (NASDAQ: AMZN), he slashed his fund's stake in one of Amazon's chief rivals by 41%.

Amazon just became billionaire Seth Klarman's second-largest holding

While Klarman opened or added to 10 positions during the December-ended quarter, none is more impactful than the 2,121,391 shares of Amazon purchased, totaling more than 9% of invested assets by year's end. This is a new holding for Klarman, with shares of Amazon last held during the third quarter of 2023.

As noted, the beauty of Amazon's operating model is that it's a leader in two industries. Most consumers and investors are introduced to Amazon through its world-leading online marketplace. According to data from Analyzify and Forbes Advisor, it accounted for a 37.6% share of U.S. e-commerce spending in 2024.

However, online retail sales are a generally high-revenue, low-margin business segment. It's Amazon's leading position in cloud infrastructure services spending through Amazon Web Services (AWS) that does much of the heavy lifting. Estimates from Synergy Research Group peg AWS's share of global cloud infrastructure service spending at 28% in the fourth quarter of 2025.

What makes AWS such an exciting segment from an investment standpoint is that the adoption of artificial intelligence (AI) solutions has accelerated its growth rate. Whereas AWS had been growing sales in the high teens, its AI-driven AWS platform delivered 24% constant-currency year-over-year sales growth in the recently completed fourth quarter. Even though AWS comprised just 18% of Amazon's net sales last year, it generated 57% of the company's roughly $80 billion in operating income.

As higher-margin operating segments, including AWS, subscription services (e.g., Prime), and advertising services, grow into a larger percentage of Amazon's revenue pie, the company's operating cash flow and earnings per share (EPS) should grow faster than its sales.

Billionaire Seth Klarman likely sees intriguing value in the company's highest-margin operating segments, where growth is accelerating. As of this writing on Feb. 13, shares of Amazon are valued at 21 times forward-year EPS and 9.8 times forecast cash flow for 2027. To put these figures into perspective, Amazon stock is trading at a 51% discount to its average forward P/E ratio over the last five years and its lowest forward multiple to cash flow since going public in May 1997. Klarman knows a good deal when he sees it.

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Baupost Group's billionaire investor cashed in his chips on Alphabet

At the other end of the spectrum, Baupost Group's billionaire boss was a decisive seller of Google parent Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG). Specifically, Klarman cut his fund's stake in the Class C shares (GOOG) by 41.5%, or 770,957 shares. It's the second consecutive quarter of a meaningful pare down of Baupost's position in Alphabet.

One possible reason Seth Klarman has been cashing in his chips is simple profit-taking. The average stock in Klarman's fund has been held for a shade over two years. Although he's not a rapid-fire trader, Klarman has shown he's willing to lock in gains when presented with the opportunity. With Alphabet stock effectively doubling between May 2025 and the end of the year, ringing the register made sense.

Another catalyst behind this selling may be Alphabet's valuation. Similar to Warren Buffett, Klarman is a diehard value investor. Although Alphabet still appears to offer phenomenal value at a forward P/E of 23 (based on Wall Street's 2027 EPS forecast), it's no longer the screaming bargain it was in the first half of 2025.

But when looking five or more years down the road, there's a high probability of Baupost's billionaire investor regretting his decision to sell shares of Alphabet.

For one, its virtual monopoly on internet search is still intact. Data from GlobalStats shows Google holds a 90% share of internet search traffic. Businesses wanting to reach consumers understand that Google search is one of the most effective ways to do so.

More importantly, cloud infrastructure service platform Google Cloud is growing like a weed. While Google Cloud notably trails AWS in market share, its sales are rising at a considerably faster pace. Giving its clients access to generative AI solutions and large language model capabilities led to 48% revenue growth for Google Cloud in the fourth quarter from the prior-year period. With over $70 billion in annual run rate sales, this segment is well on its way to becoming Alphabet's foundational cash cow.

Sean Williams has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet and Amazon. The Motley Fool has a disclosure policy.