Billionaire Philippe Laffont is a Founder & Portfolio Manager at Coatue Management, L.L.C. His fund’s top 10 holdings comprise of mostly tech stocks which depicts his love for technology. His thirst for technology was such that after graduating from MIT with a computer science degree he applied for a job at Apple multiple times but was rejected every time. This pushed him towards another calling, which was to manage a hedge fund and its holdings.
Philippe Laffont’s journey towards investing started when he moved to Spain where he started working at McKinsey. It was at this time when he learned about the “boom of the PC” and about the three pioneers of PC industry namely IBM, Dell and Microsoft. He decided to invest in these stocks which churned out more money than he was earning at that time. This led to his endeavors as an investor. In order to learn more about being an investor he got a chance to work at a mutual fund without pay where he learned about different terminologies related to the industry to “get his foot in the door”.
Philippe Laffont of Coatue Management
After his employment ended in Julian Robertson’s organization, he moved on to gather funds to start investing from his friends and family but most of his funds came from professional brokers and people who admired his entrepreneurial spirit. This led to the launch of his company on January 1, 2000, with $50 million at its disposal and the fund’s AUM now stands at $50 billion. His investment philosophy is to provide longevity and good returns for the investors; and to have investors that would bet on him for the long term. Philippe Laffont’s philosophy of helping out people is visible in his efforts to advise people on investing and he believes in helping any new tech “kid” that could become the next Tiktok.
In his interview at the Bloomberg Invest Philippe Laffont said that he is conflicted about whether small or big companies will be the AI winners. According to him the history of technology indicates that the big gets bigger but new companies have also made it through like Facebook or TikTok. He thinks that AI isn’t overhyped and the valuations aren’t out of whack right now. Here is what he said:
“It’s true that the mentions of AI in every TV and and written form is very high. And so one could say, Wow, if everybody talks about it, it must be priced in. And the only reason why more positive is I remember when I invested in Apple in 2009 when the iPhone first came out and for years people told me, Why are you invested in Apple? Everybody talks about Apple. And obviously it had an incredible run. So I actually think that sometimes because someone speaks a lot about something, it might be actually a good sign versus an overhyped sign.”
Philippe Laffont thinks the next phase of AI will be real estate with data centers and especially utilities with power. Another phase of AI, according to Philippe Laffont would be robots with artificial brains called humanoids. The technology hedge fund manager also made the following prediction which has a huge implication for the semiconductor stocks:
“I’ve made a lot of mistakes, You know, betting on these new technologies like AR/VR turns out to be not so big. 3D printing turns out to be not so big. My estimate is $100 trillion was invested in today’s dollar in the PC, CPU based infrastructure. All this is going to get ripped out to put $100 trillion or more in our GPU based infrastructure.”
Our Methodology
Stocks mentioned in this article were picked from the investment portfolio of Coatue Management at the end of the first quarter of 2024. In order to provide readers with a more comprehensive overview of the companies, the analyst ratings for each firm are mentioned alongside other details. A database of around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2024 was used to quantify the popularity of each stock in the hedge fund universe.
10. Nu Holdings Ltd. (NYSE:NU)
Regulatory filings reveal that Coatue Management owned 62 million shares of Nu Holdings at the end of the first quarter of 2024 worth $749 million, representing 2.9% of the portfolio. On May 15, Susquehanna raised the price target on Nu Holdings Ltd. (NYSE:NU) to $14 from $12 and kept a positive rating.
According to NASDAQ, the company has seen constant growth in its net income for each of the last five quarters leading to rise in share price of 40% last year and eventually a market capitalization of around $60 billion that is now 3 times that of last year in January 2023. Furthermore, 63 hedge funds are rooting for this stock to stay bullish aside from Warren Buffett’s Berkshire Hathaway, that is the most dominant shareholder in the company as of March 31st and has a position worth $1.28 billion.
Baron FinTech Fund stated the following regarding Nu Holdings Ltd. (NYSE:NU) in its first quarter 2024 investor letter:
“Nu Holdings Ltd. (NYSE:NU) is a digital bank with operations in Brazil, Mexico, and Colombia. Shares appreciated during the quarter after the company reported strong balance sheet growth and improving margins. New product launches and expansion in newer countries are yielding favorable results. Nu also benefited from inclusion in the MSCI Brazil Index, which prompted buying from passively managed funds. We continue to own the stock because Nu is disrupting the financial services industry in Latin America with its digital distribution and intense focus on user experience. The company has grown to serve over 90 million customers in less than 10 years, largely through word-of-mouth referrals. We believe the company’s superior product offering will drive continued share gains in large and growing markets.”
9. Vertiv Holdings Co (NYSE:VRT)
According to the Regulatory filings, Coatue Management owned 9 million shares of Vertiv Holdings Co (NYSE:VRT) at the end of the first quarter of 2024 worth $755 million, representing 3% of the portfolio, which is the largest holding in this stock. It is clear that this is how Laffont is betting on the AI data center theme.
Vertiv expects its organic sales to grow approximately 12% with Americas up mid-teens, APAC high single digits and EMEA low double digits. According to Vertiv, second quarter adjusted operating profit is expected to be between $315 million and $335 million and adjusted operating margin of 16.9%, up 240 basis points at the midpoint with expected benefits from price/cost partially offset by continued growth investments. For the entire year, the company plans to increase its CapEx to $200 million, which is in the company’s CapEX margin range between 2.5% to 3%.
ClearBridge SMID Cap Growth Strategy stated the following regarding Vertiv Holdings Co (NYSE: VRT) in its first quarter 2024 investor letter:
“Stock selection in the industrials sector was also a positive contributor to performance, led by Vertiv Holdings Co (NYSE:VRT) and XPO. Vertiv, a global manufacturer of power, precision cooling and infrastructure management systems for mainframe computer, server racks and critical process systems, rallied on continued demand for AI-related companies and beneficiaries and anticipation of greater demand for data center systems.”
8. Advanced Micro Devices, Inc. (NASDAQ:AMD)
According to Citi Bank’s analysts, Advanced Micro Devices, Inc. (NASDAQ:AMD) is expected to see its market share of the data center GPU market rise by 10% to $15 billion. A Buy rating was also highlighted by Citi analyst Christopher Danely on the stock with a $176 price target.
Coatue Management holds around 6.7 million shares in AMD that is worth $1.2 billion. Among the hedge funds being tracked by Insider Monkey, Texas-based investment firm Fisher Asset Management is a leading shareholder in Advanced Micro Devices, Inc. (NASDAQ:AMD) with 28 million shares worth more than $5 billion.
Currently Advanced Micro Devices, Inc.’s (NASDAQ:AMD) 2025 EPS forecast depicted the stock to be trading at around 28.6X forward P/E ratio, which is lower given Wall Street analysts expect Advanced Micro Devices, Inc. (NASDAQ:AMD) growth to be 33% this year and 59% next year.
Meridian Contrarian Fund stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its fourth quarter 2023 investor letter:
“Advanced Micro Devices, Inc. (NASDAQ:AMD) is a global semiconductor chip maker specializing in central processing units (CPUs), which are considered the core component of most computing devices, and graphics processing units (GPUs), which accelerate operations running on CPUs. We invested in 2018 when it was a mid-cap value stock plagued by many years of underperformance due to lagging technology and lost market hi share versus competitors Intel and Nvidia. Our research identified that changes and investments made by current management under CEO Lisa Su had, over several years, finally resulted in compelling technology that positioned AMD as a stronger competitor to Nvidia and that its latest products were superior to Intel’s. We invested on the the belief that AMD’s valuation at that that time did not reflect the potential for its technology leadership to generate significant market share gains and improved profits. This thesis has been playing out for several years. During the quarter, AMD unveiled more details about its upcoming GPU products for the AI market. The stock reacted positively to expectations that AMD’s GPU servers will be a viable alternative to Nvidia. Although we pared back our exposure to AMD into strength as part of our risk-management practice, we maintained a position in the stock. We believe AMD will continue to gain share in large and growing markets and is reasonably valued relative to the potential for significantly higher earnings.”
7. NVIDIA Corporation (NASDAQ:NVDA)
NVIDIA Corporation (NASDAQ:NVDA) justified its growth expectation of over 100% this year and 32% next year when it recently revealed three accelerators – B200, GB200 and GB200 NVL72 at this year’s GTC Conference. Recently, Barclays Tom O’Malley gave an overweight rating on the stock, with a $145 price target due to its potential $25 billion opportunity from countries building up their AI capabilities. O’Malley expects NVIDIA Corporation’s (NASDAQ:NVDA) earnings at $3.62 per share in fiscal 2026, while Wall Street analysts on average have a $3.55 per share estimate for NVIDIA Corp (NASDAQ:NVDA) earnings for 2026.
The largest shareholder in NVIDIA Corporation (NASDAQ:NVDA) is GQG Partners holding 133 million shares worth $12 billion whereas Coatue Management holds around 13 million shares in NVDA worth $1.2 billion
Answering to a question about whether a geopolitical risk concerning China invading Taiwan would affect NVIDIA or not, Philippe Laffont said, “I think it would adversely affect NVIDIA, it would adversely affect the stock markets around the world, it would adversely affect everybody in this room. If this happens, we think this would be obviously a very significant event.”
RiverPark Large Growth Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its first quarter 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) shares were our top contributor in the quarter following blowout 4Q results and 1Q guidance driven by strong data center sales. The company reported quarterly revenue of $22.1 billion, up 265% year-over-year, and EPS in the quarter of $5.16, up 487% year-over-year and 12% ahead of expectations. Revenue guidance for 1Q of $24 billion was 8% above very high expectations. The artificial intelligence arms race kicked-off by ChatGPT and Alphabet’s Bard, among others, has generated tremendous demand for Nvidia’s next generation graphic processors.
NVDA is the leading designer of graphics processing units (GPU’s) required for powerful computer processing. Over the past 20 years, the company has evolved through innovation and adaptation from a predominantly gaming-focused chip vendor to one of the largest semiconductor/software vendors in the world. Over the past decade, the company has grown revenue at a compound annual rate of over 20% while expanding operating margins and, through its asset light business model, producing ever increasing amounts of free cash flow. Following recent results, Jensen Huang, founder and CEO of NVIDIA stated in the company’s press release, “a trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process.”
6. Eaton Corporation Plc (NYSE:ETN)
Wall Street expects Eaton Corporation Plc (NYSE:ETN) earnings to grow 10% next year, however, the stock price growth could remain capped given the already strong bull run the company saw. The stock has gained about 67% over the past one year and is trading at 30X FY24 consensus EPS estimate of $10.50 and 28x FY25 EPS estimate of $11.70. This is much higher than the stock’s 5-year average forward P/E of 22.32x.
Currently, Coatue Management holds the largest amount of shares of Eaton Corp Plc (NYSE:ETN) with 1 million shares worth $1.29 billion.
Carillon Eagle Growth & Income Fund stated the following regarding Eaton Corporation Plc (NYSE:ETN) in its first quarter 2024 investor letter:
“Eaton Corporation Plc (NYSE:ETN) traded higher after announcing better than expected quarterly results as well as providing guidance that was ahead of expectations for the fiscal year. The electrical power equipment company also announced a proactive multi-year restructuring program, enabling Eaton to continue growing while also reducing costs.”
Ave Maria World Equity Fund stated the following regarding Eaton Corporation Plc (NYSE:ETN) in its first quarter 2024 investor letter:
“Eaton Corporation Plc (NYSE:ETN) is an intelligent power management company. The company is a long-term beneficiary in the trend towards electrification, energy transition and digitalization. Eaton is also benefiting from unprecedented global stimuli such as the Inflation Reduction Act, Infrastructure Investment and Jobs Act, the Chips and Science Act and the EU recovery plan known as the NextGenerationEU.”
5. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) as the biggest foundry enjoys over 50% market share with some of the world’s most advanced chips in its arsenal, including 2nm and 3nm nodes. It supplies chips to major players like Apple (AAPL), Qualcomm (QCOM), and Nvidia (NVDA). However, analysts have lowered its valuation on the premise that its business could be affected by any future possible conflict between China and Taiwan as it relies heavily on international supply chains. Philippe Laffont cited this geopolitical risk in his interview saying “That Capex of TSM is in Taiwan, and so at the leading edge a lot of capacity is in one very small area. Forget that it’s just in China, it’s in a very small area. I think that’s very risky.” Nevertheless, Bank of America Brad Lin increased the earnings and price target estimate since he believes that TSMC is the “key beneficiary and enabler of AI prosperity.”
Among the hedge funds being tracked by Insider Monkey, Fisher Asset Management is a leading shareholder in Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) with 29 million shares worth more than $3 billion. Philippe Laffont’s fund holds 10 million shares worth $1.4 billion.
Baron Emerging Markets Fund stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its first quarter 2024 investor letter:
“Semiconductor giant Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) contributed in the first quarter due to investor expectations for a continued strong cyclical recovery in semiconductors and significant incremental demand for AI chips. We retain conviction that Taiwan Semiconductor’s technological leadership, pricing power, and exposure to secular growth markets, including high-performance computing, automotive, 5G, and IoT, will allow the company to sustain strong double-digit earnings growth over the next several years.”
4. Salesforce, Inc. (NYSE:CRM)
Morgan Stanley analyst Keith Weiss believes that Salesforce’s PEG ratio of 1.2 indicates that the market has yet to price in operational discipline and earnings growth sustainability and has therefore given it an Overweight with a $320 price target. Similarly, an analyst at Mizuho Securities Gregg Moskowitz states that the company still is well positioned to help customers in digital transformation but needs to prioritize profitable growth. The analyst reiterated his Buy rating on the stock with a price target of $300.
According to Insider Monkey, Fisher Asset Management is a prominent investor in Salesforce, Inc. (NYSE:CRM) holding 10.8 million shares valued at around $3 billion and Coatue Management holds 4.7 million shares worth $1.4 billion.
Harding Loevner Global Equity Strategy stated the following regarding Salesforce, Inc. (NYSE:CRM) in its first quarter 2024 investor letter:
“Leading software companies have the advantage of high switching costs and the ability to incorporate new features into products customers already use. For example, Microsoft has added its Copilot chatbot functionality to everything from search (Bing Chat, recently renamed to just Copilot) to coding (GitHub Copilot) and workplace applications (Copilot for Microsoft 365). Software sold by Microsoft and other companies such as Salesforce, Inc. (NYSE:CRM), SAP, and ServiceNow are also already deeply integrated into their customers’ operations and workflow.
As large enterprises search for the right balance, Salesforce’s Data Cloud, a flagship offering, is designed to address a critical issue for them so they can make better use of AI tools. After a hectic buildout over the last few years of “data warehouses” and “data lakes”—two types of repositories for storing and processing data—across the various business units of large companies, many companies are left with what feels like islands of trapped data. Data Cloud solves this by creating a single platform to access and leverage all of an enterprise’s data, eliminating the need to constantly duplicate large amounts of information across different platforms. Users are then able to apply generative-AI technology, such as Salesforce’s Einstein tool, to a more comprehensive dataset, which enables them to better glean customers’ intentions, personalize marketing messages, and automate the processing of customer-service requests. As users build these systems, Einstein’s copiloting functionality helps their programmers work more efficiently so that IT departments with limited budgets and manpower can still develop the necessary tools. Salesforce’s management projects that revenue and earnings will climb about 9% and 45%, respectively, in fiscal 2025, citing the company’s operating leverage and cost discipline. We think these figures are achievable given the renewed focus on profitable growth, and so we added to the stock during the quarter.”
3. Microsoft Corp (NASDAQ:MSFT)
Barclays Venu Krishna recently indicated in its research report that mutual funds are taking interest in tech stocks like Microsoft Corp (NASDAQ:MSFT) leading to increase in shares about 30% over the past one year whereas the average estimate by analysts is a 14% upside from the current levels to $483. Microsoft Corp’s (NASDAQ:MSFT) Search business Bing’s market share jumped to 3.64% as of April 2024, gaining 0.88 points YoY basis. Wall Street in addition to New Street Research, who have initiated the coverage on the stock with a Buy rating, believe that earnings are expected to grow in the low teens for near future.
To no surprise, Bill & Melinda Gates Foundation Trust holds around 36 million shares worth $15 billion making it the largest shareholder of Microsoft Corp (NASDAQ:MSFT) in the first quarter of 2024. Coatue Management’s holding in this stock is worth $1.5 billion with 3.6 million shares.
Baron Fifth Avenue Growth Fund stated the following regarding Microsoft Corp (NASDAQ:MSFT) in its first quarter 2024 investor letter:
“Our second largest purchase during the quarter was the software platform, Microsoft Corporation (NASDAQ:MSFT), which we continued to add to, after initiating a position in the fourth quarter of 2023. Microsoft continues to report strong quarterly results, with revenue growth of 16% year-over-year in constant currency thanks to better-than-expected demand in its intelligent cloud segment, which saw revenue growth of 19% year-over-year, driven by Azure growth of 28% with AI contributing 6pts to growth compared with 3pts in the prior quarter. While the adoption of GenAI remains in its early stages, Microsoft has disclosed positive initial data points with 53,000 Azure AI customers as of its December quarter up from 18,000 in the prior quarter, 1.3 million paid GitHub Copilot subscribers (up 30% sequentially) and more than 230,000 organizations who have used AI capabilities in the power platform (up 80% sequentially). Management also noted that large cloud optimizations that started a year or so ago have largely finished. Profitability also continues to be strong with 44% non-GAAP operating margins, which was 120bps better than expected.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Amazon.com, Inc (NASDAQ:AMZN) witnessed an increase of 12.5% YoY in the first quarter revenue whereas its adjusted EPS more than tripled. In addition to AWS business generating operating margins above 37% in the first quarter, digital ads also contributed to Amazon.com, Inc’s (NASDAQ:AMZN) revenue as the segment reported an increase of 24% YoY to $11.8 billion in the first quarter. Revenue in North America and International segments grew as well.
The largest shareholder in Amazon.com, Inc. (NASDAQ:AMZN), according to Insider Monkey’s database of hedge funds, is Fisher Asset Management that holds 42 million shares worth over $7 billion while Coatue Management holds 10 million shares worth $1.8 billion.
Baron Fifth Avenue Growth Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its first quarter 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is the world’s largest retailer and cloud services provider. Shares increased 18.7% on quarterly results that exceeded consensus expectations, with revenue growth of 13% year-over-year and operating margins of 7.8% (up from 1.8% a year ago). We believe that Amazon is well positioned in the short to medium term to continue improving its core North American margins, which have reached 6.1% in the fourth quarter, the seventh straight quarter of margin improvement and an overall improvement of 800bps. Amazon has been rearchitecting its fulfillment network, improving efficiency, reducing cost-to-serve and accelerating delivery speeds thanks to initiatives such as regionalization, with the number of items delivered during the same day or overnight increasing by nearly 70% year-over-year. Reducing the cost to serve also enables Amazon to sell lower priced items and expand its addressable market to everyday purchases. Additionally, Amazon continues to benefit from its fast-growing, margin-accretive advertising business winning market share in digital advertising thanks to its structural advantages of a closed loop system, which enables a deterministic calculation of Return on Ad Spending. We also believe that e-commerce still has long duration growth ahead as it still accounts for less than 15% of retail. Similarly, Amazon’s cloud service, AWS, remains relatively early in its S-curve with cloud representing around 13% of worldwide IT spending13 incremental tailwinds across the three layers of the GenAI stack – infrastructure with NVIDIA’s own AI chips (Trainium and Inferentia) as well as with its offering of NVIDIA chips, platform (Bedrock), and applications (first and third party).”
1. Meta Platforms, Inc. (NASDAQ:META)
According to Wall Street analysts, earnings of Meta Platforms, Inc (NASDAQ:META) are expected to grow 14.50% next year and by 30% over the next five years on a per-annum basis. Long term analysts believe that large amount of Capex posted by Meta in the range of $35 billion to $40 billion could be for investment in AI that Meta uses to generate ads. Furthermore, Meta generated a revenue of $36.5 billion up by 27% with ads forming 97% of it. Meta Platforms, Inc’s (NASDAQ:META) ads revenue is expected to rise by 17% in 2024.
Coatue Management holds 4 million shares worth $2 billion in Meta Platforms, Inc. (NASDAQ:META) forming 8% of the fund’s portfolio, whereas GQG Partners is the largest shareholder that holds 11 million shares worth over $5 billion.
RiverPark Large Growth Fund stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its first quarter 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META): Meta was a top contributor in the quarter following fourth quarter earnings results in which the company reported accelerating revenue growth and expanding margins driven by a rebound in online advertising and strong user growth. On February 2nd, Meta reported 4Q23 revenue of $40.1 billion (+25% y/y up from +23% in 3Q23) and EPS of $5.33 (+203% y/y), and the midpoint of 1Q24 revenue guidance was $35.8 billion (+25% y/y), all well ahead of investors’ expectations. The company reported impressive revenue acceleration in its core advertising businesses, including new products like Reels and Threads. Advertiser adoption of Meta’s AI targeting tools helped drive strong ROI and higher spend across multiple categories.
META owns multiple social media platforms, each with more than one billion users, has an 81% gross margin, and generated $44 billion of FCF in 2023. Both its Facebook and its Instagram franchises have more than 2 billion Daily Active Users and generate the bulk of the company’s revenue. Recently, the company’s short form video offering, Reels, and public text-sharing app, Threads, achieved mass user engagement and growing advertiser adoption which have helped return the company to strong revenue and free cash flow growth. Even after the recent stock price advance, META shares trade at 20x Wall Street’s consensus estimates for 2025 EPS, estimates that we think could prove to be too low.”
While we acknowledge the potential of META as an AI play, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than META but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None.
