Coatue Management’s billionaire chief dumps Nvidia stock for a volatile AI infrastructure company that can maintain annual revenue growth of 50% (or larger);
The amount of data at the investor’s fingertips can be overwhelming. During a stable flow of economic data and revenue season – a 6-week period for most S&P 500 with quarterly (^gspc 0.06%)) Companies report sales results – something important can be easier through cracks.
Case in point: Some people have focused on making important others feel special on Valentine’s Day, but investors at the facility spilled beans on trading activities in the end of December quarter. It was there.
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Within 45 calendar days from the end of the quarter, institutional investors with at least $100 million in assets under management (AUM) must file Form 13F with the Securities and Exchange Commission (SEC). The form details purchasing activities and sales, but was scheduled for February 14th.
Warren Buffett’s trading activities at Berkshire Hathaway tend to be closely monitored, but he’s far from the only billionaire investor in the stock market that generates substantial returns. Coatue Management’s billionaire fund manager Philippe Laffont oversees nearly $30 billion at AUM, but he’s not leaning forward.
Laffont is a particularly interesting billionaire investor to monitor given its preference for high-growth tech stocks and companies involved in the artificial intelligence (AI) revolution.
In 2024, Lafont repeatedly cut court stakes at AI leader Nvidia (NVDA) -0.34%))However, they concluded the year by loading into polarized AI stocks, which have been acquired at nearly 6,700% since their first public offering (IPO).
Philip Lafont cut his fund’s Nvidia shares by more than three-quarters
When 2024 began, Coatue Management held 43,222,010 split-adjusted stake in Nvidia. The “split adjustment” aspect takes into account that Nvidia completed its biggest forward split in history (10-1) in June. However, when the curtains closed on December 31st, only 10,006,488 shares remained. This approximately 33.2 million shares cut will result in a haircut of 77% in 12 months.
One possible explanation for the permanent sale of Laffont’s Nvidia shares throughout 2024 is that he simply rang the registration. Laffont and his top advisors run relatively active hedge funds, with the average holding period for Coatue’s top 20 positions clocking around seven quarters (21 months). Since Nvidia Stock rose 10x since 2023, the profit lock could have been considered a smart move.
What’s bothering me is that the ongoing exit from Nvidia for Ruffont may have something to do with much more than just profits.
For example, there are real concerns about how President Donald Trump’s trade policy and tariffs will affect Nvidia. Trump has already implemented 10% tariffs on Chinese imports and is threatening to place a starter fee of at least 25% on foreign semiconductor imports. Although Nvidia does not import from China, the world’s second economy is one of the best markets. Tensed trade ties with China, retaliatory tariffs and possible tariffs on key suppliers (e.g. Taiwan semiconductor manufacturing) could narrow down Nvidia’s margins and reduce sales.
To build on this point, the Biden administration restricted exports of high-power AI chips and related equipment to China from 2022 to 2024. It appears that President Trump will likely maintain this stance to protect America’s intellectual property. In short, this is bad news for Nvidia, which continues to rely on big orders from China.
Steady increase in competitive pressure is another real concern for Nvidia. While most investors focus on graphics processing unit (GPU) manufacturers increasing production, the biggest threat to Nvidia’s AI-Data Center’s dominance may come from within. Many of the top customers with net sales have internally developed AI chips for deployment in data centers. Even if these chips serve complementary features, their presence reduces the available data center space for Nvidia hardware and ultimately weighs the company’s pricing power and margins.
The potential ultimate concern for Coatue Management’s billionaire chief is that the next big trend is a poor early performance. That is, game-changing innovation/technology of the last 30 years has finally passed a burst of rating bubble. All technologies need time to mature, and nothing suggests that AI is optimized by the business.
Image source: Getty Images.
Laffont is loaded into this highly volatile (and rapidly growing) AI infrastructure stock
Throughout 2024, Lahonto added roughly 20 new shares to the Court Management fund. A significant number of these stocks are fueled by the evolution of AI, but perhaps nothing frightens more than the customizable rack servers and storage solutions specialists’ super microcomputers (SMCI) -3.62%))is commonly called super micro.
In the quarter at the end of December, Laffont opened a new position of 8,866,735 shares in Supermicro.
On paper, super microcomputers have many appeals. Companies are throwing cash into AI investments to try to frontrun their competitors. However, to do so, you need the physical infrastructure needed to make two seconds of split-second decisions, run generative AI solutions, and train large-scale language models. Supermicro’s customizable rack server incorporates Nvidia’s top notch hopper GPU.
There is also growth. After 110% net sales growth in fiscal 2024 (ends June 30), the company’s second quarter reserve guide is between $5.6 billion and $5.7 billion in net sales, which is the midpoint This corresponds to a 54% revenue growth rate from the previous year. . Commentary from management, full-year sales will be from $23.5 billion to $25 billion in fiscal year 2025 to $40 billion to $25 billion in fiscal year 2026.
But Super Micro isn’t without the help of controversy.
Last August, short-seller Hindenburg’s research published a report claiming “accounting operations” on a super microcomputer. After this spectacular allegation, an announcement from the Wall Street Journal, a company that delays filing an annual report with the SEC, is being investigated by the Department of Justice regulators, and Ernst & Young’s resignation as Supermicro’s accountant .
The Silver Lining for Super Micro Computer shareholders is an internal probe (the findings were released in early December) that has not found any evidence of fraud or fraud by the management, and is subject to quarterly applications. That was something I didn’t expect to reset my quarterly applications. Sec.
However, at the time of this writing, Super Micro has not yet submitted its annual application starting June 30th or its first quarter operating results. The company’s growth story looks impressive on paper, but the warning tape and warning flags simply don’t go away.
