Harvard's Endowment Has 75% of Its Stock Portfolio in 5 AI Stocks. Genius Move or Dangerous Trap?

Harvard University has the largest academic endowment in the world, valued at nearly $68 billion. While the endowment invests in approximately 15,000 funds, it also holds individual stocks, with 75% of its public equity portfolio held in five AI stocks.

Let's take a closer look at these stocks to see if this is a genius move or a risky bet.

1. Space Exploration Technologies

Space Exploration Technologies (NASDAQ: SPCX) -- otherwise known as SpaceX -- is Harvard's largest individual stock holding by a wide margin, representing over 52% of its public equity portfolio. Note, however, that this $2.2 billion investment would only account for about 3% of its total endowment. As such, the investment looks like a much smarter, less risky bet than it may appear on the surface.

SpaceX is very much an investment focused on the future, with ambitious goals including putting data centers in space, Earth-to-Earth cargo transport, asteroid mining, and even colonizing Mars. The company's reusable rockets have helped change the economics of space launches, and it is now trying to adapt that technology to its larger Starship rocket, opening up a whole new world of possibilities.

With bets on space, AI infrastructure, AI coding, AI models and applications, and satellite internet, SpaceX has huge growth potential, making it a solid stock to own.

2. Taiwan Semiconductor Manufacturing

If you want to invest in the AI infrastructure build-out without picking a chip technology winner, Taiwan Semiconductor Manufacturing (NYSE: TSM) is a great option. It currently accounts for more than 8% of Harvard's stock portfolio.

TSMC is the world's leading manufacturer of advanced logic chips, including graphics processing units (GPUs), custom AI accelerators, and central processing units (CPUs). The company has a near-monopoly in advanced chip manufacturing and strong pricing power, making it one of the best ways to play the data center build-out.

3. Cerebras Systems

Cerebras Systems (NASDAQ: CBRS) makes up nearly 6% of Harvard's stock portfolio and is an interesting bet on the future of inference technology. The company's wafer-sized chips are 30 times faster than GPUs for inference and six times faster than Groq's language processing units (LPUs). Meanwhile, the company has a large commitment from OpenAI.

However, given the high cost of SRAM (static random-access memory) and the specialized power management and cooling required, Cerebras' systems are expensive and are currently viewed as a high-end niche solution. If its superior technology can break into the mainstream, the stock could have some huge upside, with the inference market projected to become much larger than the one from AI model training.

4. Amazon

Amazon (NASDAQ: AMZN) is Harvard's fourth-largest individual stock holding, accounting for over 5.5% of its public equity portfolio, and the university increased its position by over a third during Q2. The company operates the world's largest cloud computing and e-commerce businesses, and both segments have been firing on all cylinders.

Amazon Web Services (AWS), Amazon's cloud computing unit, is seeing strong revenue growth driven by AI demand, and with a nearly $500 billion backlog and massive infrastructure investments, growth should continue to accelerate in the coming years. Meanwhile, the company's investments in AI and robotics are driving incredible operating efficiency in its e-commerce operations, resulting in robust profit growth. This makes the stock a top option to own.

Image source: Getty Images.

5. Alphabet

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) rounds out Harvard's top-five stock holdings, accounting for nearly 4% of its portfolio. Alphabet is the most complete AI company, having both a top-tier foundational model and world-class AI chips.

Alphabet's Tensor Processing Units (TPUs) are one of the company's biggest advantages, allowing it to train its AI models and run inference at significantly lower cost than competitors. This also gives the company some of the best cloud computing economics, with a one-year payback on its chip and networking investments when it uses its TPUs. Meanwhile, it feeds AI models directly into its Google Search platform, where it has a huge distribution and monetization edge. This makes Alphabet a top AI stock to own over the long haul.

Geoffrey Seiler has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.