Over three decades, Druckenmiller compounded capital at roughly 30% a year without a single losing year, a record I am not sure is matched by anyone, anywhere Buffett included. So what’s this investing maestro doing now?
In the third quarter, Druckenmiller exited Broadcom entirely, a company that is a tollroad in the chip wars of AI.
What’s he thinking and what’s he buying if he’s selling this chip giant?
Key Points
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Strong AI execution, but higher system costs and Nvidia’s dominance limit asymmetry at today’s valuation.
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Its integrated commerce and fintech ecosystem is still scaling in underpenetrated Latin American markets.
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Druckenmiller shifted from a crowded AI trade to a platform built for decade-long compounding.
Why Druckenmiller Likely Sold
Broadcom remains a core beneficiary of the AI infrastructure boom. It dominates high-end Ethernet switching and routing, with chips that effectively set the speed limits inside modern data centers. As AI clusters scale, networking becomes the bottleneck, and Broadcom controls that bottleneck.
For years, it’s designed ASICs for top customers like Alphabet and Meta, and its client list has expanded as hyperscalers look for lower per-unit costs and tighter control over silicon.
Financial execution has been strong, with AI-driven revenue growth accelerating and management signaling continued momentum. But the tradeoffs matter. While ASICs can be cheaper than GPUs at the chip level, they often raise system-level costs due to custom software stacks and more expensive optical interconnects. That complexity limits adoption to only the largest customers.
With expectations already elevated and valuation stretched, Broadcom may simply have offered less upside asymmetry than it once did, a classic Druckenmiller reason to step aside.
What Druckenmiller Bought
MercadoLibre operates the dominant digital commerce ecosystem in Latin America, but many investors still underestimate how deeply embedded it has become. Its marketplace already captures roughly a quarter of regional online retail, yet overall e-commerce penetration remains far below developed markets.
What sets MercadoLibre apart is integration. It isn’t just a marketplace, it’s also the region’s largest digital advertiser, a leading fintech payments processor, and the operator of the fastest logistics network in Latin America. Each layer reinforces the others, strengthening network effects and raising switching costs.
Recent margins have come under pressure, but largely by design. Investments like lower free-shipping thresholds in Brazil and credit card launches in underbanked countries hurt near-term profitability while expanding long-term customer value. In places like Argentina, where most adults still lack credit cards, MercadoLibre isn’t just taking share, it’s creating first-time digital finance users.
That combination of long runway, structural tailwinds, and ecosystem lock-in fits squarely with Druckenmiller’s historical preference for durable compounders.
The Bigger Takeaway
Broadcom remains an excellent business, but it operates in a capital-intensive, hyper-competitive space where leadership advantages can narrow quickly. MercadoLibre, by contrast, sits at the center of multiple secular growth curves in markets that are still years from maturity.
Druckenmiller’s shift looks less like a call on next quarter’s earnings and more like a bet on where compounding will be easiest over the next decade.