We recently compiled a list of Billionaire Phillipe Laffont’s Top 10 “Mostly AI” Stock Picks. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against Philippe Laffont’s other stock picks.
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”.
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.
A close-up of a complex network of integrated circuits used in logic semiconductors.
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.”
Overall TSM ranks 5th on our list of billionaire Phillipe Laffont’s top stock picks. You can visit Billionaire Phillipe Laffont’s Top 10 “Mostly AI” Stock Picks to see the other stocks that are on hedge funds’ radar. While we acknowledge the potential of TSM as an investment, our conviction lies in the belief that 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 TSM 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. This article is originally published at Insider Monkey.