Billionaire investor Philippe Laffont, founder of Coatue Management, has made a significant adjustment to his portfolio, reducing his fund’s position in Nvidia by 14% and increasing its stake in Alphabet by 259%. This move comes as Nvidia’s market capitalization has skyrocketed to $4.3 trillion, making it the world’s most valuable company. Laffont’s decision to trim his Nvidia holdings and invest in Alphabet may be a strategic move to diversify his portfolio and capitalize on Alphabet’s growing presence in the AI landscape.
Key Points
- Philippe Laffont founded the hedge fund Coatue Management.
- Coatue’s largest positions are in leading artificial intelligence (AI) stocks.
- Last quarter, Coatue trimmed its exposure to Nvidia and rotated profits into Alphabet stock.
- Laffont may be hedging his portfolio away from pure-play semiconductor and data center businesses while seeking exposure to broader pockets of the ongoing AI infrastructure movement.
About halfway through every quarter, any institutional investment fund that manages more than $100 million is required to file a Form 13F with the Securities and Exchange Commission (SEC), documenting all the stocks that it bought and sold during the prior quarter. One such firm that is closely monitored is Coatue Management, founded by Philippe Laffont. During the third quarter, Coatue reduced its position in Nvidia by 14% — selling 1.6 million shares. At the same time, Laffont increased the fund’s stake in Alphabet by 259% — acquiring 5.2 million shares.
Let’s explore what may have motivated these moves and assess if now would be a good time to follow Laffont’s lead. Alphabet’s trajectory throughout the AI revolution has been almost the opposite of Nvidia’s. Following the release of ChatGPT, many on Wall Street started sounding the alarm that the rise of large language models (LLMs) and chatbots could spell the end of traditional internet search engines. However, Alphabet has made significant progress across various areas within the AI realm, including the release of its own LLM, called Gemini, and the growth of its cloud infrastructure business, Google Cloud Platform (GCP).
Image source: Getty Images.
Is selling Nvidia stock right now a good idea?
When OpenAI released ChatGPT to the general public in November 2022, Nvidia’s market capitalization was roughly $345 billion. Today, the company is worth $4.3 trillion — making the chip designer the world’s most valuable company. According to Coatue’s filings, the firm has held some exposure to Nvidia stock since 2016. Given Nvidia’s meteoric rise over the last few years, taking some gains from a winning long-term position off the table seems reasonable.
Image source: Nvidia.
Why might Laffont like Alphabet stock?
Alphabet is a strategic investor in OpenAI’s top rival, Anthropic. As part of their relationship, Anthropic is using Google Cloud to meet some of its computing power needs. Their deal includes access to Alphabet’s custom Tensor Processing Units (TPUs). I think the biggest selling point for Alphabet is its vertically integrated business model. The company’s various assets in search (Google), streaming video (YouTube), consumer electronics (Android), cloud computing (GCP), autonomous vehicles (Waymo), and now custom hardware (TPUs) all share a common thread: artificial intelligence.
Is Alphabet stock a good buy right now?
Among the cloud hyperscalers, Alphabet’s stock is still the cheapest by forward price-to-earnings (P/E) ratio, though it has in recent months climbed back to near parity with Microsoft. The caveat from the analysis above is that Alphabet has clearly experienced a meaningful valuation expansion over the last couple of months, while the valuations of Amazon and Microsoft have both compressed a bit.
GOOGL PE Ratio (Forward) data by YCharts.
Before you buy stock in Alphabet, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. If you’ve owned Nvidia stock throughout the AI revolution, then odds are you’re sitting on a nice gain. It might not be a bad choice to take some profits and buy into other emerging players such as Alphabet as the AI infrastructure buildout continues to accelerate.
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