Billionaires bought these 3 top artificial intelligence (AI) stocks. Should you follow suit?

Investors looking for investment ideas often turn to the investment ideas of billionaires. This may make sense because one often reaches billionaire status by making wise investment decisions.

One problem with this approach is that a billionaire may have different investment goals than the average investor looking to accumulate wealth over a lifetime. Instead of looking for long-term gains, a billionaire may buy a stock as a short-term trade. We don’t know what the billionaires will do in advance, and we probably never will Why they make the investment decisions they do. So while it makes sense to see what stocks the super-rich like, average investors need to call additional step and confirm that a stock fits their investment needs.

Let’s examine three stocks that billionaires have recently bought into.

Amazon

Of course, Amazon (AMZN 0.78%) it is more of a quantity known to investors of all wealth levels. Its leadership in online retail and cloud computing has made it a favorite among consumers and investors alike.

Although its online sales business has not been a growth center, it has benefited from subscription sales, third-party sales services and advertising. Additionally, amid strong growth in cloud computing and AI, its AWS arm continues to generate the bulk of Amazon’s operating income.

Although net sales rose just 11% annually in the first half of 2024, a continued rebound from weakness in 2022 sent profits up 141% over the same period.

Moreover, while he is 45 The P/E ratio might not sound cheap, it’s well below the stock’s average of 87 earnings multiples over the past five years.

PE AMZN report given by YCharts

That may have helped attract more billionaire investors to the stock in the second quarter of 2024. Ken Griffin, Ray Dalio, and Paul Tudor Jones are just a few of the billionaires who added to positions that quarter.

With numerous lines of business and $89 billion liquidityAmazon is among the safest individual stocks to own, which likely makes it a great choice for the average investor.

Invesco QQQ Trust

Another noteworthy “stock” choice of billionaires is year exchange traded fund (ETF) that holds the 100 non-financial stocks on Nasdaq-100 index. The Invesco QQQ Trust (QQQ 0.61%) it tends to attract investors at all levels of interest because individual components tend to have little influence.

Although it contains 100 stocks, its weighting tends to vary. Its top holding, Appleit makes up just under 9% of the fund at the time of writing. Also, the top 10 stocks, all but one of which are tech stocks, account for just over 50% of its assets.

Invesco QQQ Trust performed well for investors. While its 37% return over the past year approximates close to S&P 500His performance, his 436% return over 10 years almost doubled this index.

So it’s no wonder investors like billionaires Cliff Asness and Steven Cohen added to the stock in Q2. For them, this was probably a way to balance safety and considerable growth. Given the safety of the multi-stock fund and its returns, the ETF is a wise choice for most investors.

Super Micro Computer

Super Micro Computer (SMCI 2.25%) emerged from obscurity in recent years as a partnership with Nvidia has led to a massive increase in demand for its servers.

Volatility has been particularly pronounced over the past year as the stock surged past the adjusted $120 per share level in March. However, investors started to sell and sentiment worsened after a short-seller report from Hindenburg Research in late August and the announcement that it would delay filing its latest 10 K reports to the SEC. (Remember, short sellers make money when the stock they’ve shorted goes down, so they have a reason to spread the pessimism.)

Millennium Management — led by billionaire Israel Englander — bought shares of Supermicro in the second quarter ahead of the short report, and I think that given the P/E ratio is 24 and analysts are forecasting 51% earnings growth in fiscal 2025, some risk-tolerant investors may feel justified in buying the stock now, despite the potential accounting issues that could emerge if the short seller is correct.

However, it’s impossible to know how things will shake out, so I think Supermicro is a speculative money stock and one that risk-averse investors should probably avoid.

Investing like billionaires

Billionaires can make excellent stock picks. Indeed, billionaires don’t achieve this status by making bad stock picks. Although no one is right 100% of the time, and average investors need to do their own due diligence to figure out if a particular stock is right for their portfolio.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Will Healy has positions in Super Micro Computer. The Motley Fool has positions in and recommends Amazon, Apple, and Nvidia. The Motley Fool has a disclosure policy.