Billionaire Stanley Druckenmiller Dumped Shares of Nvidia and Palantir and Is Loading Up on His New Favorite Artificial Intelligence (AI) Stock

You might not realize it, but one of Wall Street's most important data releases of the quarter occurred less than a week ago.

No later than 45 calendar days following the end to a quarter, institutional investors who are managing at least $100 million are required to file Form 13F with the Securities and Exchange Commission. A 13F offers investors an under-the-hood look at which stocks Wall Street's top money managers bought and sold in the latest quarter. May 15 was the 13F filing deadline for first-quarter trading activity.

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While Warren Buffett tends to be the most-tracked asset manager, he's far from the only billionaire investor who's delivered outsized returns. For instance, investors tend to also keep close tabs on billionaire Stanley Druckenmiller, who manages more than $3 billion in assets at Duquesne Family Office.

Though Druckenmiller's investing strategy often involves long and short positions across various asset classes, it's his approach to investing in the artificial intelligence (AI) revolution that's raising eyebrows.

In less than two years, Druckenmiller has overseen the disposition of Wall Street's two hottest AI stocks and has chosen to load up his fund in another industry giant.

Stanley Druckenmiller sent Nvidia and Palantir to the chopping block

While dozens of companies have benefited from the evolution of AI, no two artificial intelligence stocks have been the face of the movement more than graphics processing unit (GPU) titan Nvidia (NASDAQ: NVDA) and data-mining specialist Palantir Technologies (NASDAQ: PLTR). Since 2023 began, shares of Nvidia and Palantir have rocketed higher by 827% and 1,920%, respectively.

The lure of Nvidia has been its near-monopoly like share of the GPUs currently deployed in AI-accelerated data centers. The company's Hopper (H100) and next-generation Blackwell chips offer a clear compute advantage over rivals. In turn, this has led to superior pricing power for Nvidia.

Meanwhile, Palantir's AI-driven software-as-a-service Gotham and Foundry platforms have shined. In particular, its government-focused Gotham platform has landed numerous multiyear contracts with the U.S. government and its immediate allies. Gotham has helped Palantir sustain a 25%+ sales growth rate and pushed the company to recurring profitability.

Despite all this, billionaire Stanley Druckenmiller has bid adieu to both stocks. Accounting for Nvidia's historic 10-for-1 stock split in June 2024, Duquesne Family Office dumped all 9,500,750 shares of Nvidia between June 30, 2023 and June 30, 2024. As for Palantir, Druckenmiller's fund shed all 769,965 shares from March 31, 2024 to March 31, 2025.

Though it's entirely possible these sales represent nothing more than simple profit-taking, there are other factors that may be at work.

With regard to Nvidia, there's the very tangible worry about an increase in competition. Specifically, many of Nvidia's largest customers by net sales are developing AI-GPUs and solutions to use in their data centers. While this internally developed hardware is unlikely to match the compute potential of Nvidia's Hopper or Blackwell, it'll be notably cheaper and more readily available. Nvidia's declining gross margin provides evidence that its superior pricing power has begun waning.

There's also the risk that an AI bubble will form and burst. Every next-big-thing technology dating back more than three decades has endured an early stage bubble. With over 90% of its fiscal fourth-quarter revenue coming from its data center segment, Nvidia stock would be in big trouble if the AI bubble bursts.

Thanks to Palantir's multiyear government contracts and its subscription-driven model with Foundry, it wouldn't suffer the same fate as Nvidia. Nevertheless, poor sentiment during a bubble would weigh on Palantir because of its outsized valuation premium.

On a trailing-12-month basis, Palantir is commanding a price-to-sales (P/S) ratio of 103! Previous companies that have been on the leading edge of game-changing innovations over the last three decades typically topped out at P/S ratios of 30 to 40 before tumbling. No megacap company has ever been able to sustain this excessive of a valuation premium over an extended period, and it's unlikely that Palantir is the exception to history.

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Duquesne Family Office's chief has made this trillion-dollar AI stock a top-10 holding

But while Stanley Druckenmiller was sending Nvidia and Palantir Technologies to the chopping block, he was building up his stake in another key AI player: world-leading chip fabrication company Taiwan Semiconductor Manufacturing (NYSE: TSM), which is also known as "TSMC."

During the March-ended quarter, Druckenmiller purchased 491,265 shares of Taiwan Semi, which increased his fund's stake by 457% from the end of December and lifted this trillion-dollar chip giant to Duquesne Family Office's ninth-largest position by market value.

Taiwan Semiconductor Manufacturing plays an integral role in the production of chips being deployed in AI-accelerated data centers. It's currently in the process of rapidly expanding its chip-on-wafer-on-substrate (CoWoS) capacity from 35,000 monthly units in 2024 to an expected 135,000 units come 2026. CoWoS is a technology that's necessary for packaging the high-bandwidth memory needed for the high transfer rates observed in AI-accelerated data centers.

For the moment, a good portion of this AI chip demand is coming from Nvidia. However, TSMC can benefit regardless of the company that needs its services. Advanced Micro Devices and Broadcom are also ramping their AI-chip production and leaning on TSMC to do so.

What might allow TSMC to escape the brunt of a potential AI bubble-bursting event is that it handles far more than just AI chips. The chips and components Taiwan Semi produces are found in smartphones, wireless internet-connected devices, and next-generation vehicles, in addition to data centers. For instance, TSMC is the primary manufacturer of the processors Apple uses in its iPhone. This diversity of operation doesn't tie TSMC solely to the AI revolution.

On the other hand, tariffs remain something of a gray area for Taiwan Semiconductor. Despite President Trump pausing higher "reciprocal tariffs" for 90 days on April 9, it's not yet clear is TSMC will escape tariffs over the long run, and what this might mean for its operating margin. While TSMC does have a brand-new fabrication facility in Arizona, the bulk of its high-compute chips are still made in Taiwan.

Additionally, it's fair to question if Taiwan Semi is fully valued. Though its forward price-to-earnings ratio of 18 looks perfectly reasonable, its shares are valued at more than 10 times trailing-12-month sales, which is about a 16% premium to its average P/S multiple over the last five years.

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, Palantir Technologies, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.