Billionaire Steven Cohen's AI Stock Bet: Apple Out, Axon In

In the ever-evolving world of technology and investing, billionaire hedge fund manager Steven Cohen has made a significant move by selling his entire stake in Apple (AAPL) and investing in a relatively unknown AI stock, Axon Enterprise (AXON). Cohen's Point72 Asset Management closed out the third quarter with a $39 billion portfolio, and these trades highlight his confidence in the AI sector's growth potential.

Apple: A once-strong position, now facing headwinds
Cohen's decision to sell his Apple stake comes as the tech giant faces several challenges that could impact its profitability in the coming years. Some of the key headwinds include:

1. Market share loss in China: Apple's iPhone has lost significant market share in China, with sales declining more than 18% in the December quarter. Consequently, Apple failed to rank among the top three sellers in the Chinese market in 2024.
2. Potential loss of services revenue: If federal judge Amit Mehta prohibits Alphabet's Google from paying for default search placement in the Safari browser, Apple could lose $20 billion in annual services revenue, representing 4% to 6% of its profits.
3. Unmet AI-driven upgrade cycle expectations: Despite the introduction of AI features (Apple Intelligence) in October, a historic iPhone upgrade cycle has yet to materialize. Consumers appear unmoved by AI functionality, according to analysts.
4. Expensive valuation: With a current valuation of 33 times earnings, Apple's stock price has increased 72% over the last two years, primarily due to multiple expansion, not earnings growth.

Given these challenges, Cohen may have decided to cut his losses and seek more promising opportunities elsewhere.

Axon Enterprise: A small position with significant growth potential
Cohen's new position in Axon Enterprise reflects his confidence in the company's AI-driven growth prospects. Axon is a public safety company that works with U.S. law enforcement, the federal government, commercial enterprises, and certain international governments. The company's AI features and products, such as automatic transcription and redaction of video evidence, automated license plate reading, and Draft One (a body camera recording-to-police report drafting tool), have contributed to its strong financial performance.



In the third quarter, Axon reported solid financial results, with revenue increasing 32% to $544 million and non-GAAP earnings increasing 19% to $1.45 per diluted share. The company also raised its full-year outlook, projecting revenue to increase 32% in 2024. Axon's market leadership in Tasers, body cameras, and digital evidence management software, along with its momentum in drones and robotics, positions the company well for continued growth.

While Axon's valuation may be concerning, with a current multiple of 120 times adjusted earnings, the company's consistent earnings beats and growth potential could make the stock appear reasonably valued in hindsight. Risk-tolerant investors with a long-term perspective may find Axon an attractive opportunity in the AI sector.

Cohen's AI stock bet: A sign of things to come
Cohen's decision to sell Apple and invest in Axon reflects his confidence in the AI sector's growth potential. As AI continues to revolutionize various industries, investors can expect more successful investors to follow Cohen's lead and allocate capital to promising AI stocks. By staying informed about the latest trends and developments in the AI sector, investors can identify similar opportunities and build a diversified portfolio of AI-driven investments.

In conclusion, Steven Cohen's AI stock bet on Axon Enterprise highlights the growth potential of the AI sector and the importance of staying informed about the latest trends and developments in the technology industry. As AI continues to reshape various industries, investors can expect more successful investors to follow Cohen's lead and allocate capital to promising AI stocks. By staying informed and diversifying their portfolios, investors can position themselves to capitalize on the AI revolution's long-term growth prospects.