Stanley Druckenmiller Increased Amazon More Than 10-Fold and Opened an AMD Position. What’s the Common Bet?

In the second quarter, Duquesne Family Office made two distinct AI investments - one in Amazon.com and the other in Advanced Micro Devices (AMD). The firm increased its Amazon position by an astonishing 1,083% to 541,600 shares and opened a 72,900-share stake in AMD. Both investments are underpinned by the same underlying premise: the rise of artificial intelligence (AI) infrastructure.

Amazon.com, Inc. (NASDAQ:AMZN) offers Amazon access to an AI-driven demand platform. Its cloud computing subsidiary, AWS, generated a 36.7% increase in revenue during the second quarter, with the company's capital spending projected to reach approximately $220 billion. Amazon's cloud customer relationships, custom silicon, and extensive infrastructure are believed to enable it to capture AI usage across various models and chips.

However, depreciation, power, and construction costs could potentially outweigh the utilization before returns materialize. The company's strong cloud growth must ultimately generate returns on an investment larger than many national economies.

Advanced Micro Devices (NASDAQ:AMD) presents a more direct operating leverage opportunity. Its data-center revenue more than doubled, and customers are seeking an alternative to Nvidia for accelerators and CPUs. If AMD improves its software and hyperscalers deploy Instinct at scale, revenue can potentially grow faster than the broader infrastructure market.

However, AMD must compete against an established platform while simultaneously funding an aggressive roadmap. The company's success depends on sustained deployments, which could eventually lead to durable margins.

The rationale behind both positions is that Amazon can profit from rising AI consumption regardless of which chip supplier gains market share, while AMD can benefit if increased AI consumption creates room for multiple suppliers. However, internal conflicts may also exist. Amazon's own chips could limit AMD's growth potential, and slower cloud utilization would pressure both the AI infrastructure buyer and processor seller. Both investments could be beneficial if the market grows faster than these internal conflicts.

Hedge funds mirrored Duquesne's moves, with Amazon ownership rising to 369 funds and AMD ownership increasing to 164 funds in the second quarter. Arrowstreet Capital expanded its Amazon position by 24% to 40.3 million shares, while Marshall Wace increased its AMD common-share stake by 3% to 3.9 million shares. Despite the modest short-interest in AMD, it represents only a small fraction of the float and trading volume.

While Duquesne acknowledges the potential of AMZN and AMD as investments, other AI stocks are believed to offer greater upside potential with less downside risk.