Tesla Stock vs. Amazon Stock: Billionaires Buy One and Sell the Other

In Q1 2024, Millennium Management's Israel Englander and Coatue Management's Philippe Laffont increased their Amazon positions by 5% and 1% respectively, while reducing their Tesla stakes by 43% and 24%, despite Wall Street analysts' generally positive outlook for both stocks. The moves come as Amazon reported solid Q1 results and is investing heavily in AI, though tariffs pose a potential risk, while Tesla faces declining market share and relies on future growth from robotaxis and humanoid robots, making its current valuation appear high.

Analysis

Prominent hedge fund managers Israel Englander of Millennium Management and Philippe Laffont of Coatue Management adjusted their holdings in Amazon and Tesla during Q1 2024, buying more Amazon while significantly reducing their Tesla stakes. Specifically, Englander increased his Amazon position by 5%, making it his fourth-largest non-options holding, and Laffont raised his by 1%, now his second-largest. Conversely, Englander cut his Tesla stake by 43%, and Laffont trimmed his by 24%. These moves occurred despite Wall Street analysts' median target price for Amazon ($237) implying a 15% upside from its then-current price of $206, while Tesla's median target ($307) suggested a 10% downside from its $342 price. Amazon demonstrated robust Q1 performance with revenue climbing 9% to $155 billion and net income jumping 62% to $1.59 per diluted share, supported by its dominant positions in e-commerce, advertising technology, and cloud computing (AWS), with significant AI investments aimed at enhancing all segments. However, Amazon's Q2 operating income guidance of $13 billion to $17.5 billion was cautious, falling short of the $17.6 billion Wall Street expectation, citing ongoing concerns which may include tariff impacts, as Morgan Stanley estimates 60% of Amazon's third-party sellers have China exposure. Amazon's stock, valued at 33 times earnings with a projected 10% annual earnings growth through 2026, is considered somewhat expensive, though it has consistently beaten earnings estimates. Tesla, on the other hand, experienced a significant Q1 demand slowdown, with market share falling nearly 10% in the U.S. and Europe and over 3% in China, attributed to an aging product lineup and CEO Elon Musk's controversial public image. The investment case for Tesla centers on future affordable models (expected 2H 2025) and ambitious long-term projects like autonomous ride-sharing (robotaxis, launching in Austin in June) and humanoid robots, which Musk envisions as trillion-dollar markets. Despite a projected 14% annual earnings growth through 2026, Tesla's valuation at 150 times earnings is deemed 'absurdly expensive', and consensus earnings estimates have recently declined sharply, potentially reflecting concerns over tariffs on auto parts. While the long-term potential of robotaxis and robots is substantial, its realization is uncertain and distant, likely influencing the hedge funds' sales based on near-term catalysts.

Key Decisions for Investors

• Investors might consider initiating or augmenting positions in Amazon, leveraging its strong Q1 results, leadership in key growth sectors like cloud and AI, and history of exceeding earnings expectations, while remaining cognizant of its current valuation and potential tariff-related risks.
• Extreme caution is advised for Tesla due to its declining market share, exceptionally high valuation, and dependence on speculative, long-term ventures; existing shareholders with strong conviction in Elon Musk's long-term vision may opt to hold, but prospective investors face substantial near-term risks and should closely monitor progress on robotaxi deployment and affordable model launches.
• Monitor Amazon's Q2 operating income relative to its cautious guidance and any material developments regarding U.S.-China tariffs, as these are key near-term factors influencing its outlook.
• Closely track Tesla's execution on its robotaxi service rollout, timelines for more affordable vehicle production, and any further erosion in market share, as these will be critical determinants for justifying its valuation.