Billionaire Steven Cohen just sold his Amazon stock and picked up this other member of the Magnificent Seven.

Investment firms that manage more than $100 million in stocks must file a Form 13F with the Securities and Exchange Commission (SEC) once a quarter. These filings can be useful because they provide a glimpse into what sophisticated company investors, such as hedge fund managers, are buying and selling.

One investor I enjoy watching is Steven Cohen of Point72 Asset Management. Last quarter, Point72 sold about 600,000 shares of Amazon (AMZN -0.74%) stock — reducing its stake by 16%. At the same time, the hedge fund initiated a position in another Magnificent Seven stock, Apple (AAPL -0.44%)buying nearly 1.6 million shares.

Let’s dig into what might have driven these moves and assess whether Apple deserves a place in your portfolio as well.

Why Sell Amazon Stock Right Now?

Although Amazon is known for its e-commerce marketplace and cloud computing enterprise, its ecosystem also encompasses advertising, streaming and entertainment, subscription services, and more. With generative artificial intelligence (AI) applications having the potential to disrupt so many different end markets, it’s no surprise to see Amazon at the forefront of the AI ​​conversation.

Simply put, technology has the chance to ignite all kinds of new growth opportunities for one of the world’s largest and most diverse businesses — and Amazon is making a lot of moves. For example, he invested $4 billion in a start-up called Anthropic. A cornerstone of this relationship is that Anthropic will train future versions of its large language models (LLM) on Amazon’s internal Trainium and Inferentia semiconductor chips.

Additionally, Amazon recently announced an $11 billion infrastructure investment to build its own data centers in Indiana. This investment follows Amazon’s purchase of a nuclear-powered data center in March.

In total, Amazon is spending a lot of money on various AI initiatives. While I can’t say for sure what led Cohen and his team’s calculation to cut back on Amazon, the company’s aggressive spending in AI may have inspired some questions about the return on those investments.

Image source: Getty Images.

Why buy Apple stock right now?

For more than a year, Apple has struggled to demonstrate consistent revenue growth both across its product line and across different geographic markets. While this dynamic has led some to doubt Apple’s growth prospects, I’d say the company’s financial trends make sense from a macro perspective.

High levels of inflation and a rising interest rate environment have led US consumers to cut back on spending over the past two years. Moreover, a sluggish economy in China — one of Apple’s biggest markets — has been a theme from a global perspective that has hurt the company.

AAPL Earnings Data (Quarterly) by YCharts.

However, all hope is not lost for Apple. In fact, the company may be looking at several different catalysts right now.

For starters, the iPhone 16 launch is currently underway. Recent interest rate cuts from the Federal Reserve could prompt some new spending from younger consumers. In turn, Apple users can choose to upgrade their old iPhones — leading to a so-called “supercycle” event for the company.

Moreover, as Apple continues to integrate more features using OpenAI and AI technology into its products, demand for the company’s newer hardware could witness an increase.

Should you follow Cohen’s moves?

Here’s the most important thing to note from Cohen’s latest moves: Point72 still owns a lot of Amazon stock. In fact, even after reducing its position, Amazon remains Point72’s largest position, comprising about 2% of its total portfolio.

I think Cohen’s purchase of Apple stock is a smart move for a few reasons. First, adding Apple to Point72’s portfolio provides additional exposure and diversification among megacap AI players.

While companies like Amazon have been making moves in AI for some time, Apple’s initiatives have followed a slower pace. Because of this, there’s an argument to be made that the AI ​​narrative is less baked into Apple’s stock price compared to Amazon’s valuation.

Moreover, the release of the iPhone 16 and new AI integrations into the iOS ecosystem could trigger some short-term sales growth, leading to long-term headwinds for Apple over time. That could make the timing of Cohen’s acquisition from Apple a particularly smart move.

At the end of the day, I think Cohen is just hedging his various positions and diversifying his exposure to AI more broadly. Personally, I see both Amazon and Apple as solid options in a crowded AI landscape. I think Cohen’s diversification strategy is a good one to replicate, especially for investors with a long-term time horizon.