Stanley Druckenmiller's Duquesne Family Office fully exited Broadcom last quarter and built new stakes in Amazon and Alphabet instead. The shift tracks a broader move by hyperscalers toward their own custom AI chips over off-the-shelf semiconductors.
Druckenmiller swaps the chipmaker for the hyperscalers
Duquesne Family Office fully exited its Broadcom position last quarter and used the proceeds to build stakes in Amazon and Alphabet. Druckenmiller bought Nvidia in late 2022 and made hundreds of millions of dollars on the position, but later admitted he sold too soon, fully disposing of the stake in 2024.
Broadcom traded up to a P/E of 40 at one point last quarter. Druckenmiller had bought the shares in the prior quarter below a forward P/E of 30. Amazon and Alphabet, meanwhile, were raising capital through debt and new stock to fund heavy data-center spending, and appear to be taking more control over which chips go into that infrastructure.
Hyperscalers push their own chips over off-the-shelf silicon
Amazon CEO Andy Jassy said the largest number of new chips going into its data centers this year will be its own custom Trainium chips, not Nvidia GPUs or other off-the-shelf solutions. Alphabet has long partnered with Broadcom on its Tensor Processing Units, but it recently signed a deal with Marvell for specialized inference TPUs and said it is seeing very strong TPU demand, even selling TPU systems to select external customers.
Cheap multiples despite negative free cash flow
Amazon and Alphabet currently trade at 20.5 times and 16.4 times forward earnings, respectively, multiples depressed by concerns over their capital spending. Amazon's free cash flow turned negative over the trailing 12 months, burning $7.6 billion. Alphabet posted negative free cash flow of $5.9 billion last quarter for the first time as a public company. Yet both carry large contracted-revenue backlogs: Alphabet ended the quarter with $514 billion in remaining performance obligations. Amazon's backlog reached $496 billion.
As companies exercise greater control over their own chip supply, they are well-positioned to deliver strong returns for investors going forward.
Source: Motley Fool
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