Billionaire Stanley Druckenmiller ran Duquesne Capital between 1981 and 2010, a hedge fund that returned roughly 30% annually over three decades without suffering a single losing year. That makes him one of the most successful fund managers in history.
In 2010, Druckenmiller closed Duquesne Capital and stopped managing money for clients. However, he still handles his own multibillion-dollar portfolio through Duquesne Family Office, and investors can track his trades using quarterly Forms 13F filed with the SEC.
In the second quarter, Druckenmiller sold more than 1.5 million shares of Nvidia(NASDAQ: NVDA), cutting his stake by 88%. He also purchased 36,493 shares of MercadoLibre(NASDAQ: MELI), starting a small position in a supercharged growth stock that has soared 290% during the last five years.
Here's what investors should know about Nvidia and MercadoLibre.
1. Nvidia
Nvidia is best known for its dominance in data center graphics processing units (GPUs). The company accounted for 98% of data center GPU shipments in 2023 and currently holds a 90% market share in artificial intelligence (AI) chips, according to Joseph Moore at Morgan Stanley. But Nvidia is truly formidable because it has a full-stack accelerated computing platform that spans hardware, software, and services.
The foundation of that platform is CUDA, an ecosystem of development tools unrivaled by products from competing chipmakers. Nvidia also sells data center central processing units (CPUs) and networking gear, as well as software and cloud services for AI application development. Its platform supports use cases that range from route optimization in logistics to recommender systems in retail to interactive avatars in customer service.
Nvidia reported strong financial results in the second quarter of fiscal 2025 (ended July 2024). Revenue surged 122% to $30 billion on strong data center sales, driven by demand for AI hardware and software, and non-GAAP net income climbed 152% to $0.68 per diluted share. Nvidia is well-positioned to maintain that momentum in future quarters.
Analysts at Forrester Research recently wrote, "The company's innovation, roadmap, and vision are clear and have kept it moving at lightspeed compared to other semiconductor manufacturers for AI chips." Indeed, Wall Street expects Nvidia's adjusted earnings to increase 54% over the next year, which makes its current valuation of 65x adjusted earnings look reasonable.
Despite Druckenmiller selling shares in the second quarter, I think long-term investors should consider buying a small position today. Few (if any) companies are better placed to benefit from the explosive growth in AI spending likely to play out in the coming years.
2. MercadoLibre
MercadoLibre runs the largest e-commerce marketplace in Latin America as measured by visitors and sales, and its market share is still trending higher. It will account for 29% of online retail sales in the region in 2024, up seven-tenths of a percentage point from 2023, according to eMarketer. The driving force behind that trend is the ecosystem of adjacent services that make its marketplace more convenient, accelerating the inherent network effect.
Most notably, the company has the fastest and most extensive delivery network in the region and ranks as one of the largest fintech platforms, according to a corporate slide deck. MercadoLibre is also the third-largest digital advertiser in Latin America, and eMarketer expects it to "lead the world in ad revenue growth in 2024."
MercadoLibre reported strong financial results in the second quarter. Revenue increased 41% to $5 billion, due to a sequential acceleration in commerce and fintech sales. Meanwhile, GAAP earnings soared 103% to $10.48 per diluted share as net profit margin expanded 3 percentage points to 10.5%, reaching an eight-year high.
Commerce-segment sales have now accelerated in five consecutive quarters, due in large part to strength in advertising and increased adoption of the MELI+ loyalty program. Investors have good reason to expect robust growth in the future. Analysts expect retail ad spending in Latin America to compound at 33% annually through 2028, and MercadoLibre is the largest retail media advertiser in the region.
Looking ahead, Wall Street expects MercadoLibre's earnings to increase 56% over the next year. That consensus estimate makes the current valuation of 75x earnings look fair, but certainly not cheap. Long-term investors comfortable with volatility should consider purchasing a few shares today, but it would be prudent to start small and build the position over time.
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Trevor Jennewine has positions in MercadoLibre and Nvidia. The Motley Fool has positions in and recommends MercadoLibre and Nvidia. The Motley Fool has a disclosure policy.
