LaFont’s Cortue Management piled up stakes in two of Wall Street’s most popular artificial intelligence (AI) stocks in the quarter that ended in June, backing companies critical to the AI supply chain.
Thanks to the advent of the Internet, information is no longer important for everyday investors. Between the six-week quarterly earnings season in which the majority of S&P 500 companies report their results, and the weekly economic reports, investors can become overwhelmed and important data can leak out.
You may not have realized it, but perhaps the most significant data dump of the third quarter occurred in mid-August.
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Institutional investors with assets under management (AUM) of at least $100 million are required to file Form 13F with the Securities and Exchange Commission within 45 calendar days after the end of a quarter. Simply put, the 13F tells investors which stocks Wall Street’s smartest money managers bought and sold in the most recent quarter, in this case the quarter ending in June.
Frankly, 13F is far from perfect. Short positions (if any) are not listed and are recorded up to 45 days after the end of the quarter, potentially providing outdated information to active hedge funds. Nevertheless, they provide valuable clues about which stocks, industries, sectors and trends are consistently on the radar of top wealth managers.
Warren Buffett, CEO of Berkshire Hathaway, is perhaps the most favored asset manager on Wall Street, but many other billionaires, including Cortue Management’s Philip Laffont, Investors also tend to draw crowds. Mr. LaFont and his team invest primarily in innovative tech stocks and had nearly $25.7 billion in assets under management at the end of June.
But what really raises eyebrows is what Lafont and his team have done with three of Wall Street’s hottest artificial intelligence (AI) stocks.
Laffont’s Coatue aggressively sold stakes in Nvidia and Palantir
There are probably no two AI stocks in recent memory as hot as semiconductor giant Nvidia. (NVDA -4.72%) and cloud-based data mining specialist Palantir Technologies (PLTR -4.88%).
The otherworldly demand for AI graphics processing units (GPUs) has helped Nvidia amass a market cap of more than $3 trillion since early 2023. Meanwhile, Palantir’s stock price is up 601% in about 22 months. The gains were facilitated by the AI-driven Gotham platform, tasked with helping the federal government plan and execute missions and collect data.
Even though Nvidia and Palantir both have competitive advantages and are irreplaceable, the staff at Laffont and Coatue have been decisive sellers of both stocks. From March 30, 2023 to June 30, 2024, Mr. Laffont oversaw the sale of his fund’s 72% stake in Nvidia. By comparison, Cotu’s savviest investors, including Laffont, unloaded all of Palantir’s stock (4,816,195 shares) in the quarter that ended in June.
While profit taking is the logical reason to summarize this selling activity, there are other headwinds that could have prompted LaFont and his investment advisors to take the plunge.
History is an issue that cannot be ignored, especially when it comes to Nvidia. For three decades, the next big innovations and technologies, including the Internet in the mid-1990s, were unable to avoid nascent bubbles. In other words, investors have a terrible habit of overestimating how quickly innovative technologies will become mainstream, and this has historically been to the detriment of companies leading these trends, such as Nvidia. It means it’s over.
Additionally, Nvidia will face a lot of new competition. Although external competitors receive the most attention, internal competition may be a greater concern. All four of Nvidia’s largest customers by net revenue are developing their own AI-GPUs, which could ultimately narrow Nvidia’s opportunities to capture valuable data center “real estate.”
When it comes to Palantir, valuation may be the most important concern for Coatue’s investment team. Palantir’s unique size gives it some valuation premium, but it’s currently valued at 105x 2025 expected earnings per share (EPS) and 29x expected sales. .
This is a very aggressive valuation considering Gotham’s revenue cap is somewhat limited. This means that Palantir only works with the U.S. government and its allies, which limits the platform’s reach beyond its domestic borders.
But while Coatue’s smartest investors are busy sending Nvidia and Palantir stocks to the chopping block, they’re making steady inroads into another top-tier artificial intelligence infrastructure company.
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Laffont’s stake in this AI infrastructure leader has increased over 3,500% this year
During the quarter ending June, Lafont and his team made six new purchases, adding to 21 existing holdings. Most of these additions have been relatively small, but one that continues to stand out is LaFont’s aggressive acquisition of Taiwan Semiconductor Manufacturing, the world’s leading chip manufacturer. (TSM -2.03%).
At the start of 2024, Courtue Management held just 312,466 shares of Taiwan Semi, making it the fund’s 66th largest holding by market capitalization. Six months later, the company now holds a total of 11,393,702 shares, making it the third largest holding. This would represent an increase of more than 3,500% in total shareholdings in the first half of 2024.
As you might expect, the excitement surrounding Taiwan Semi has to do with the company’s role in manufacturing GPUs for AI-powered data centers. Orders for Nvidia’s H100 GPU (commonly known as “Hopper”) and its successor GPU architecture (Blackwell) are backlogged, as Taiwan Semi anticipates long-tail demand for its services. means.
Meanwhile, Taiwan Semiconductor has been actively investing in production capacity. The company aims to increase its chip-on-wafer-on-substrate (CoWoS) packaging capacity to 80,000 wafers per month by 2026, but at least one Wall Street analyst said We believe that Taiwan Semi is one year ahead of schedule. High-bandwidth memory packaging is a cost-effective necessity for AI-powered data centers. This means that Taiwan Semi plays an important role in the supply chain.
There’s no denying that artificial intelligence is driving Taiwan Semiconductor’s sails, but Laffont and his team are probably realizing that there’s more to producing artificial intelligence than just AI-GPUs. Dew. For example, the company is responsible for manufacturing all of Apple’s customized chips, including the chips built into the market-leading iPhone.
If history rhymes again and the AI bubble bursts at some point in the future, Taiwanese cicadas had multiple sales channels established long before AI gained the most attention since sliced bread. So it’s going to be somewhat isolated. Although these other sales channels do not offer the same level of growth potential as AI, the broad distribution diversity ultimately benefits Taiwan Semiconductor.
Finally, Mr. Lafont and his advisers may be attracted to Taiwan Cicada’s still-attractive valuation. With the understanding that forecasts can and do change, the stock is valued at a multiple of 24x projected 2025 EPS, and sales and earnings growth rates are It exceeds 20%.
