Wednesday, April 17, 2024

Billionaire George Soros Makes a Huge Bet on Alphabet

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Concerns surrounding the growth of big tech do not apply to George Soros.

The Federal Reserve‘s decision to aggressively raise interest rates to fight inflation, which is at a 40-year high, threatens to push the economy into a recession, many analysts say. 

This inflation, which is particularly impacting consumers, is a huge problem for the technology sector, because tech products and services are the first to suffer from spending cuts. Consumers tend to limit their discretionary purchases, while companies delay their investments in new hardware, for example.

Jeff Bezos, the founder of Amazon  (AMZN) – Get Free Report, summed up the dire situation on November 16 with these tips for small businesses and consumers.

“My advice to people, small business owners is take some risks off the table. If you are going to make a purchase maybe slow down that purchase a little bit,” the billionaire said. “If you are an individual and you are thinking about buying a new large screen TV maybe slow that down keep that cash, see what happens. Same thing with a refrigerator, a new car whatever, let’s take some risks off the table.”

“If you are a small business maybe delay some capital purchases: do you need that new piece of equipment? Maybe it can wait a little bit, have some cash on hands; just a little bit of risk reduction could make the difference for that small business.”

Similar concerns were relayed by technology groups themselves, when they published their third quarter earnings last month.

“In the third quarter, we did see a pullback in spending by some advertisers in certain areas and search ads,” Philipp Schindler, Alphabet’s Senior Vice President and Chief Business Officer, told analysts. “For example, in financial services, we saw a pullback in the insurance, loan, mortgage and crypto subcategories.”

“There’s no question we’re operating in an uncertain environment, and that businesses, big and small, continue to get tested in new and different ways, depending on where they are in the world.”

To cope with these difficult times, the tech sector has relied on drastic cost reductions, the most visible of which is waves of job cuts. Mid-November, Amazon started cutting 10,000 jobs, or about 3% of its corporate workforce, an unprecedented move in its history.

Meta Platforms  (META) – Get Free Report also announced the elimination of 11,000 jobs, or 13% of the group’s 87,000 employees. It was the first job cuts in Facebook’s history since its creation in 2004.

Downsizing has spread across the tech and crypto sectors: Twitter  (TWTR) – Get Free Report, Microsoft  (MSFT) – Get Free Report, Lyft  (LYFT) – Get Free Report, Coinbase  (COIN) – Get Free Report, Stripe have all enacted job cuts recently. 

Alphabet  (GOOGL) – Get Free Report, Apple  (AAPL) – Get Free Report and others have either frozen or are slowing down the pace of hiring.

Soros, through his firm Soros Fund Management (SFM), held 53,175 Alphabet shares as of July 31. Three months later, his stake in Alphabet rose to 1,01 million shares, an increase of 1,806%, according to a regulatory filing.

The billionaire acquired shares in the quarter in which Alphabet stock prices lost 12.2% of their value. 

If he sold Amazon shares, it was a small number, signaling that Soros still believes in the e-commerce giant, which left the $1 trillion club in October. Amazon’s market capitalization is currently at $960 billion.

SFM owns 1,981,161 Amazon shares compared to 2,004,500 in the second quarter. It’s a small decrease of 1.16%.

Stock market regulations require managers of funds with more than $100 million in U.S. equities to file a document, known as a 13F, within 45 days of the end of the quarter, to list their holdings in stocks that trade on U.S. exchanges.

The value of Soros’ U.S. equity portfolio rose 4.3% quarter-over-quarter to almost $5.9 billion. Soros Fund Management is a family office that manages public and private equity. 

“SFM invests globally in a wide range of strategies and asset classes, including public equities, fixed income, commodities, foreign exchange, alternative assets and private equity,” the firm says on its website.

Soros, whose net worth is estimated at $8.5 billion, up by $1 billion as of November 22, according to the Bloomberg Billionaires Index, is well known for pouring money into philanthropic efforts. Most of his firm’s assets belong to Open Society Foundations, which supports “people across the world who work for justice, equity and free expression.”

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