Billionaire Stanley Druckenmiller Still Isn’t Buying Nvidia. But He Just Opened a Position in a Challenger That’s Soared More Than 100% This Year.

Stanley Druckenmiller was an early believer in artificial intelligence (AI) giant Nvidia (NASDAQ:NVDA), building up a significant stake back in 2022. In fact, the AI chip leader was the billionaire's biggest position for a good part of the following year. But in 2024, he sold all his Nvidia shares, saying the valuation had become rich. Druckenmiller didn't make a clean break, however, and instead expressed some regret. He even said he would consider buying Nvidia shares again at a lower valuation.

Since, Nvidia's valuation has declined -- it even reached a low of 17x forward earnings estimates earlier this year -- but so far this hasn't been enough to bring Druckenmiller back to this AI story. Instead, in the second quarter, Druckenmiller opened a new position in an Nvidia challenger that's seen its stock soar more than 100% this year. Let's check out the billionaire's move and consider whether it's one to follow.

Image source: Duquesne Family Office.

Druckenmiller's success over 30 years

First, let's talk about why we're looking to Druckenmiller for investing inspiration. The billionaire ran the hedge fund Duquesne Capital Management for 30 years and, over that period, delivered an average annual return of 30%. Importantly, he didn't post any money-losing years. So, Druckenmiller has proven his investing strengths over time -- and that means we might turn to him for ideas.

Today, the billionaire oversees $5.2 billion at the Duquesne Family Office and invests in several industries, including technology. Though Druckenmiller closed his Nvidia position after clearly winning on that investment, he remains bullish on stocks involved in the AI market. And that leads me to his latest buy.

In the second quarter, Druckenmiller opened a position in Nvidia rival Advanced Micro Devices (NASDAQ:AMD). He bought 72,900 shares, giving the stock a 0.8% weight in his portfolio. Clearly, this isn't Druckenmiller's biggest bet, but it does show his interest in getting in on a chip specialist during this phase of the AI story.

Nvidia is the market leader in graphics processing units (GPUs), the key chip driving crucial AI tasks like the training of models. The company focused on the market early, and that's helped it stay ahead of rivals. AMD, a leader in the central processing unit (CPU) market, has increased its AI offerings in recent years and has seen significant growth.

More growth potential than Nvidia

Since AMD's revenue is considerably lower than that of Nvidia, it may have the potential to deliver more growth in the coming quarters -- and that idea appeals to investors. For example, in the recent quarter, Nvidia's revenue topped $96 billion, while AMD generated $11 billion. Meanwhile, AMD's efforts in the AI space, such as the recent launch of the AMD Helios rackscale system, could offer revenue a major boost. We've seen momentum already, with a doubling of data center revenue in the recent quarter.

It's also important to note that, even though Nvidia is taking big steps in the CPU market, AMD remains a leader in that space. CPUs are the chips present in all computers, and they're emerging as key tools in the powering of AI agents -- agentic AI involves the use of AI to complete various tasks as part of a specific job. AMD's strengths in CPUs position it well to benefit from the upcoming stages of the AI revolution, as AI is applied to real-world situations.

So, should investors follow billionaire Stanley Druckenmiller into this Nvidia challenger? Though successful hedge fund managers have demonstrated their skills over time, their investment priorities, investment horizons, and comfort with risk may differ from ours. This means, even if a top investor is buying a particular stock, it's important to carefully consider the company to see if it's right for you.

In this case, AMD, trading at more than 60x forward earnings estimates, looks expensive -- even though the company's AI future looks bright, most investors may want to wait for a more favorable entry point.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.