As much as investors might loathe the idea of rapid moves lower in the iconic Dow Jones Industrial Average (^DJI -0.62%), broad-based S&P 500 (^GSPC -1.07%), and widely followed Nasdaq Composite (^IXIC -1.71%), stock market sell-offs are normal, healthy, and inevitable.

Following a seemingly nonstop rally in all three indexes, the Dow Jones, S&P 500, and Nasdaq Composite shed 8.6%, 10.1%, and 13.7% of their respective value between Feb. 19 and March 13. You'll note the double-digit percentage drops for the Nasdaq and S&P 500 officially placed both indexes into correction territory.

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Entering 2025, the stock market was at its third-priciest valuation when back-tested 154 years, based on the S&P 500's Shiller price-to-earnings Ratio. In other words, with stock valuations so far outside of their historic average, the table had been set for the major indexes to undergo a sizable pullback at some point in the not-too-distant future.

The priciness of stocks, in general, isn't something billionaire money managers have overlooked. Before the Nasdaq and S&P 500 sold off by double digits, billionaire investors piled into two sensational stocks, while sending another exceptionally popular highflier to the chopping block.

Domino's Pizza

The first amazing business that Wall Street's most-admired billionaire money manager -- Berkshire Hathaway's Warren Buffett -- simply can't get enough of in recent quarters is restaurant chain Domino's Pizza (DPZ 0.72%).

Despite the Oracle of Omaha being a net seller of stocks for nine consecutive quarters to the tune of almost $173 billion, he oversaw the addition of 1,104,744 shares of Domino's Pizza during the December-ended quarter. This increased Berkshire's position by more than 86% in three months and lifted its stake in Domino's to 6.9%.

Arguably one of the top lures of Domino's for Buffett is an intangible factor: trust. Since undertaking a successful mea culpa marketing campaign more than 15 years ago, where the company admitted its pizza was subpar and it would work to reearn the trust and business of consumers, Domino's transparency has continued to drive new and repeat traffic into its stores. It takes a long time to build trust, and it's plainly evident from Domino's operating growth that its products, innovation, and marketing messages are resonating with its customers.

Domino's management team has also done an excellent job of meeting or exceeding five-year goals. The company's latest initiative, "Hungry for MORE," was introduced in late 2023 and emphasizes innovation, the incorporation of technology to improve its supply chain and boost output, and relies on the know-how of its franchisees to grow the brand.

There's a sizable runway for Domino's to increase its exposure beyond the borders of the U.S., as well. The 2.7% same-store sales growth registered for international stores in 2024 marked the 31st consecutive year of overseas same-store sales growth.

While Domino's Pizza isn't the traditional deep discount stock Warren Buffett typically seeks out, the Oracle of Omaha does have a keen understanding of consumer buying habits. Strong demand for the company's products, coupled with transparency and trust, has made Domino's Pizza stock a phenomenal investment.

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Taiwan Semiconductor Manufacturing

A second sensational stock that billionaire asset managers were buying ahead of the Nasdaq and S&P 500 sell-off is world-leading chip fabrication company Taiwan Semiconductor Manufacturing (TSM -1.39%).

Viking Global Investors' billionaire chief Ole Andreas Halvorsen runs an active fund where the average holding period for his fund's top-20 positions is less than one year. During the fourth quarter, Halvorsen added to 29 existing positions and opened stakes in 22 companies. Perhaps no new holding stands out more than the 4,089,619 shares acquired of Taiwan Semi.

No trend has been hotter on Wall Street over the last two years the rise of artificial intelligence (AI) -- and arguably no company is playing a more important role in fueling the AI revolution than Taiwan Semiconductor. Whereas the company was targeting monthly chip-on-wafer-on-substrate (CoWoS) capacity of 35,000 units in 2024, it's aiming nearly quadruple this figure to 135,000 CoWoS units per month by 2026. CoWoS is a necessity for packaging the high-bandwidth memory that makes AI-accelerated data centers tick.

But it's worth noting that Taiwan Semi is a chip fabricator for much more than just AI data centers. It's a core provider of advanced chips used in Apple's domestic-leading iPhone. The company's manufactured chips can also be found in various Internet of Things devices, consumer electronics, and vehicles.

If there's one prevailing concern for Taiwan Semiconductor Manufacturing, which may not have been readily apparent when Halvorsen was aggressively buying shares of the company during the fourth quarter, it's how President Donald Trump's tariffs might affect its margins. The president is tinkering with the idea of imposing a tariff of around 25% on semiconductor imports, which is problematic given that Taiwan Semi produces in the neighborhood of 90% of its advanced chips in its home market of Taiwan.

Nevertheless, the prospect of sustained double-digit sales growth has been too tempting for Viking Global Investors' billionaire chief to ignore.

Nvidia

On the other end of the spectrum, billionaire money managers have been steadily reducing their exposure to the face of the AI revolution, semiconductor giant Nvidia (NVDA -3.31%).

Perhaps the most-prominent seller is billionaire Philippe Laffont of Coatue Management. Laffont has sold shares of Nvidia in each of the last seven quarters, with the aggregate of this selling activity equating to 39,795,532 shares. Note, this figure takes into account the historic 10-for-1 forward split Nvidia conducted in June 2024.

No investor is going to argue that Nvidia hasn't done wonders for the tech sector or the AI movement. Its Hopper (H100) graphics processing unit (GPU) and successor Blackwell GPU architecture are the leading hardware choices by businesses looking to run generative AI solutions and build/train large language models.

But at the same time, there are reasons to believe Nvidia's parabolic move higher isn't sustainable.

Based on what history tells us, there hasn't been a game-changing technology or innovation that's avoided a bubble-bursting event early in its expansion for more than 30 years. Investors consistently overestimate how quickly a new technology will gain utility and enjoy widespread consumer/enterprise adoption. Businesses aren't close to optimizing their AI solutions, as of yet, which suggests we're still a long way from this being a mature technology. If the AI bubble bursts, no company would be more directly impacted than Nvidia.

Steadily growing competition is another issue for Nvidia -- and I'm not just talking about direct competitors. The biggest threat to Nvidia's data center real estate might just be its top customers by net sales. Most members of the "Magnificent Seven" are developing AI chips of their own to use in their data centers. Even though these chips can't go toe-to-toe with the Hopper or Blackwell, they're notably cheaper and more readily accessible than Nvidia's hardware.

Lastly, Nvidia's valuation has been an eyesore. While its forward price-to-earnings (P/E) ratio isn't egregiously high, its price-to-sales ratio did hit a level last summer that's consistent with prior bubble-bursting events.