Billionaire Stanley Druckenmiller Dumped Google Parent Alphabet and Piled Into a Trio of Skyrocketing Memory and Storage Stocks

You might not realize it, but Friday, May 15, was one of the most important days of the second quarter -- and not just because it marked Jerome Powell's final day as Fed chair. It was the deadline for institutional investors with over $100 million in assets under management to file Form 13F with regulators.

With Warren Buffett retired, Stanley Druckenmiller of Duquesne Family Office might be the new most-followed billionaire money manager on Wall Street. During the March-ended quarter, Duquesne's 13F filing shows Druckenmiller dumped his entire stake in Google parent Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG). At the same time, he piled into a trio of the stock market's hottest memory and storage stocks: Sandisk (NASDAQ: SNDK), Micron Technology (NASDAQ: MU), and Seagate Technology (NASDAQ: STX).

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Duquesne's billionaire boss jettisoned the hottest member of the "Magnificent Seven"

Perhaps the most eyebrow-raising move in billionaire Stanley Druckenmiller's portfolio was the sale of all 385,000 shares of Alphabet's Class A stock (GOOGL) during the first quarter.

One of the more logical reasons for the sale may be simple profit-taking. Druckenmiller oversees an active fund, with an average hold time of roughly eight months. If presented with the opportunity to cash in his chips and lock in a sizable profit, Duquesne's lead investor often takes it. In the two-plus quarters that Druckenmiller's fund held Alphabet stock, it appreciated by well over 50%.

It can also be argued that the hottest member of the "Magnificent Seven" lost its value proposition following a 140% rally over the last year. A company that could be nabbed for under 17 times forward-year earnings a year earlier is now trading at nearly 28 times next year's earnings per share (EPS).

Lastly, Druckenmiller has been openly skittish about artificial intelligence (AI) stocks. While he views the technology as a long-term winner, he believes that "AI might be a little overhyped now" and "AI could rhyme with the internet," according to a CNBC interview from May 2024.

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Stanley Druckenmiller has an insatiable appetite for memory and storage stocks

At the other end of the spectrum, Duquesne Family Office's chief investor added more than two dozen new positions. Among them are 38,155 shares of Sandisk, 50,700 shares of Seagate Technology, and 23,400 shares of Micron Technology.

Though Druckenmiller has expressed short-term skepticism about AI stocks, this clearly hasn't extended into the memory and storage space. The rapid expansion of AI data center infrastructure calls for a lot of high-capacity hard drives, high-bandwidth memory (HBM), NAND flash memory, and DRAM. Demand for this hardware has overwhelmed its supply, leading to significant price increases and a parabolic move higher in gross margin for Sandisk, Micron, and Seagate Technology.

The wild thing about this memory and storage trio is that two of the three remain historically inexpensive, relative to analysts' forward-year EPS estimates, despite their shares absolutely skyrocketing. Sandisk and Micron are up 3,370% and 660%, respectively, over the trailing year, yet their forward price-to-earnings ratios are just 8 and 7 amid a historically pricey stock market.

Given Druckenmiller's track record of seeking out winning short-term trades, he likely anticipates that the relative cheapness of this trio, and the overwhelming demand for high-capacity hard drives, HBM, NAND, and DRAM, will supersede any near-term worrisome headlines on Wall Street.

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