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A great way to find promising growth stocks is checking what the smartest investors are buying. Billionaires are interested in preserving and growing their wealth, and they have the resources to conduct exhaustive research in companies that might be out of reach for the average investor.
Here are two recent billionaire picks that could be smart buys for 2025 and beyond.
1. Lam Research
Artificial intelligence (AI) is transforming business operations and driving significant growth for the semiconductor industry. The computing chips used for AI research will become more complex over time, and investors can profit off this trend by buying shares of Lam Research (NASDAQ: LRCX).
Billionaires David Tepper of Appaloosa Management and Chase Coleman of Tiger Global Management were buying shares in the fourth quarter.
There are major shifts underway in how advanced processors are designed. This is driving strong demand for Lam's equipment and services used to design and manufacture chips. Following a cyclical downturn for the industry, Lam is experiencing a strong recovery. Revenue grew 16% year over year for the December-ending quarter.
Annual growth can be inconsistent, but over the last 10 years, Lam's compound annual revenue growth was 12%, with earnings per share growing at a 23% rate. Over the last four quarters, Lam Research earned $4.3 billion on $16.2 billion of revenue.
What stands out about Lam's business is that it earned a high return on capital employed of 35% last year, which indicates a competitive advantage. It benefits from close ties with leading chip manufacturers like Taiwan Semiconductor Manufacturing and Micron Technology. Micron is a leading supplier of memory chips for the data center market, which plans to increase capital spending by 67% this year. This will benefit Lam's business.
Lam should continue to benefit from growing investment from leading chipmakers in graphics processing units (GPUs) and high-bandwidth memory. The company sees growing demand for AI chips as a key long-term growth driver for the business. AI is expected to drive about $200 billion of spending on wafer fabrication equipment over the next five years.
Tepper and Coleman are likely buying the stock because of Lam's competitive position, high returns on capital, and excellent growth prospects in the AI chip market. Wall Street analysts forecast the company's earnings to grow at an annualized rate of 15% over the next few years, which could lead to market-beating returns.
2. Uber Technologies
The shift toward convenience and relatively low cost of using ride-hailing services has benefited Uber Technologies (NYSE: UBER). These trends continue to drive strong growth for the business, and new services like delivery and autonomous driving could support more gains for investors over the long term. David Tepper was a buyer last quarter, while Chase Coleman is also holding a small position in the stock.