This prominent billionaire has $6 billion invested in these two AI stocks

Billionaire investors can be worth following, especially since they may have a long track record of delivering excellent returns. One of the most successful fund managers is Chase Coleman of Tiger Global Management. Coleman founded the firm in 2001 and currently has a net worth of more than $5 billion, according to filings Forbes.

At the end of the second quarter of 2024, Tiger Global’s top two holdings were Microsoft (MSFT -2.02%) and Meta platforms (META -0.60%)with a combined market value of $6 billion in these “Magnificent Seven” stocks. Here’s why they’re smart long-term purchases.

1. Microsoft

Tiger Global has held a position in Microsoft since 2018, making it its second-largest holding. In the second quarter, Tiger Global held 5.3 million shares worth nearly $2.4 billion. Over the past six years, the stock has risen more than 300% compared to S&P 500total return of 145% including dividends.

Microsoft is unstoppable on several fronts. More than 1.3 million companies use Microsoft Office, and its Windows operating system has a 72% share of the desktop market.

This has been the heart of Microsoft’s business for many years, and the new artificial intelligence (AI) assistant Copilot is proving to be an opportunity to further monetize its software. In the quarter ended June, revenue from productivity software and other services rose 11% year over year, with Microsoft 365 consumer subscriptions reaching 82.5 million.

However, most investors are interested in the stock for its thriving cloud services business. Microsoft Azure is in a solid competitive position, having gained significant market share from the leader Amazon Web Services.

According to Statista, the enterprise cloud market opportunity is expected to reach $773 billion in 2024. Following such an opportunity, Microsoft spent $14 billion in capital expenditures in the last quarter alone, during which half of that went to data centers and other long-term infrastructure needs. – growth over time.

Microsoft is ramping up investments in cloud software and AI while reporting rising profits. Earnings rose 10% from last year, and Wall Street consensus pegged the company’s earnings to settle at an annualized rate of 13% over the next few years.

Not all tech companies are able to invest in AI and show profitable growth. For example, another leading cloud company, Snowflakemargins are expected to be under pressure in the near term as it ramps up investment in AI hardware such as graphics processing units (GPUs).

Microsoft’s ability to deliver strong earnings growth while making these capital investments is why it’s truly the best-in-class AI stock to buy for the long term.

2. Meta Platforms

Meta is Tiger Global’s largest holding, with 7.4 million shares worth $3.7 billion at the end of June. Coleman’s firm has held a position in the stock since 2016. It has delivered a market-crushing 360% return over the past eight years.

Meta is another Magnificent Seven stock that has great growth prospects. Global digital ad spending is expected to grow to $870 billion by 2027, according to Statista. This is an attractive opportunity for the Meta family of apps, including Instagram, WhatsApp and Messenger, which are ad-monetized and have more than 3.2 billion daily active users.

AI will play a crucial role in helping the company deliver more relevant content to users, thereby encouraging more investment from advertisers who want their brands in front of a highly engaged user base. Meta already has more than $14 billion in capital spending this year to support its technology infrastructure, including data centers and servers.

Meta has clear advantages in the digital advertising market and is already seeing results. Revenue was incredibly strong in the second quarter, up 22% year over year. Management said online commerce ad revenue from its apps was the biggest contributor to that growth.

Like Microsoft, Meta is positioned to benefit from AI while reporting strong earnings growth to support shareholder returns. The company’s earnings rose 73% year-over-year last quarter.

It won’t continue to grow revenue as strongly as management wants to increase the capacity to train more advanced AI models for its business to prepare for future growth, but it has committed to efficiently allocating capital across the business.

Wall Street analysts expect Meta to report long-term earnings growth of 19% on a year-over-year basis. The stock trades at an average market price-earnings multiple of 25, which should lead to excellent returns for investors.