Stanley Druckenmiller says A.I. could win big coming out of a recession, and he’s bullish on Nvidia
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Billionaire investor Stanley Druckenmiller said artificial intelligence could be a fruitful opportunity for investors, especially when the economy comes out of what he thinks an imminent downturn. “I actually think AI is very, very real and could be every bit as impactful as the internet literally going forward,” Druckenmiller said at the Sohn Investment Conference , which was held virtually Tuesday. “It could be a beautiful opportunity in a hard landing just like ’01, ’02 … a beautiful opportunity when the tech bubble bursts. … AI could be there.” After the burst of the dotcom bubble in the early 2000s, technology stocks quickly gained dominance and went on to lead a decade-long bull market. Recently, the enthusiasm around AI has given the overall market a big boost. As much as $700 billion of the $2.5 trillion market cap creation for growth stocks this year came from bets on AI’s potential, according to Trivariate Research. The legendary investor, who has never had a down year in the markets, said he is exposed to the AI space through two stocks so far — Nvidia and Microsoft . He said Nvidia could fare well even in a severe recession. NVDA YTD mountain Nvidia “My firm has only been able to participate in AI by owning Nvidia and Microsoft,” Druckenmiller said. “It’s not even clear to me if we had a really bad recession, that Nvidia would even come down.” Nvidia has jumped a whopping 96% this year, boosted by their biggest quarterly gain since 2001. Investors grew bullish on Nvidia’s A.I. vision, while also viewing the inventor of the graphics processing unit as one of the chip manufacturers best positioned to endure an economic slowdown that’s already hurting personal computer and wider semiconductor sales. Druckenmiller once managed George Soros’ Quantum Fund and shot to fame after helping make a $10 billion bet against the British pound in 1992. He later oversaw $12 billion as president of Duquesne Capital Management before closing his firm in 2010. Hard landing Druckenmiller has been calling for a recession for a while. He believes that the extraordinary quantitative easing and zero interest rates over the past decade created an asset bubble, and we are now in the final stage of the bubble burst. “I’m sitting here staring in the face of the biggest asset and probably the broadest asset bubble, forget that I’ve ever seen, that I’ve ever studied,” Druckenmiller said. “It went on for 10 or 11 years and then it was the grand finale, the government spent $5 trillion on Covid. The Fed financed 60% of it. And now we have a big hike in interest rates.” The Federal Reserve has hiked interest rates for 10 times since last year, taking the fed funds rate to a target range of 5%-5.25%, the highest since August 2007. “It’s hard to look at that constellation of factors and know that we’ve only had a few soft landings since 1950. All of them were preceded by what I would call proactive rather than reactive Fed Policy,” Druckenmiller said. He added that he wouldn’t be surprised if the recession has already started in the second quarter. To be sure, he stressed that he’s not predicting a downturn worse than 2008. “There are going to be bodies out there when you have free money. People do stupid things,” Druckenmiller said.
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