Billionaire Philippe Laffont Moves from AI Giants to a Lucrative Stock Split

Coatue Management's recent 13F filing has revealed insights into Philippe Laffont's significant investment decisions for the third quarter. This filing offers a glimpse into the activity of one of Wall Street's notable investors, allowing others to track buying and selling patterns among top money managers.

November has been a busy month for financial news, especially with the period following Election Day and the start of earnings season. During this time, many major companies report their financial results, making it easy for important announcements to go unnoticed.

On November 14, institutional investors managing over $100 million in assets were required to file Form 13F with the SEC. This form is crucial for tracking the stocks that influential investors have recently bought or sold.

Billionaire investor Warren Buffett is well-known for his successful trading strategies, achieving remarkable returns with his company's Class A shares (BRK.A) over several decades. However, he is not the only billionaire with a keen eye for profitable investments.

Philippe Laffont has gained recognition since founding Coatue Management in 1999, focusing primarily on high-growth technology companies. By the end of the third quarter, his fund managed nearly $27 billion in assets.

Laffont Sells AI Stocks Nvidia and AMD

Recently, Laffont has been making waves by selling shares in two of the leading firms in artificial intelligence (AI)—Nvidia and Advanced Micro Devices (AMD). Despite the rising interest in AI, which analysts predict could contribute $15.7 trillion to the global economy by 2030, Laffont has cut back significantly on these investments.

Over the last 18 months, Coatue has offloaded an astounding 39,663,859 shares of Nvidia, representing an 80% reduction in its position since March 2023. Similarly, it has sold 4,249,190 shares of AMD, a reduction of 50% during the same timeframe.

Several factors may be driving this decision to reduce exposure to these notable AI stocks. Historically, new technologies often experience early-stage speculation that doesn't sustain long-term growth. Investors frequently overestimate how quickly new technologies will be adopted, suggesting that the current enthusiasm for AI might lead to a bubble. If this bubble were to burst, it could heavily impact companies like Nvidia and AMD, which play pivotal roles in AI infrastructure.

Additionally, concerns about gross margins may influence Laffont's strategy. Nvidia's high gross margins are currently benefitting from strong demand for AI GPUs, but as AMD increases its production, the supply landscape could change.

Moreover, many of Nvidia’s largest customers are now developing their own GPUs, potentially eroding Nvidia's pricing power. The lack of insider buying over recent years at both companies may also signal a lack of confidence from executives, further complicating investor sentiment.

Laffont Purchases Chipotle Stock

In contrast to his sales of Nvidia and AMD, Laffont has made a substantial investment in Chipotle Mexican Grill, a fast-casual restaurant chain that completed a historic stock split in June. Coatue's 13F indicates that Laffont acquired 4,575,054 shares of Chipotle, making it one of the largest holdings in Coatue's portfolio.

Since its IPO at $22 in 2006, Chipotle shares have skyrocketed by around 13,900%. This growth is based on the brand's commitment to high-quality ingredients and customer loyalty. Chipotle has focused on using responsibly raised meats and locally sourced vegetables when possible, winning over consumers who prioritize quality.

Chipotle’s management has also realized that customers are willing to pay a premium for better food, which has helped them maintain strong pricing power. Innovations like the "Chipotlane," a dedicated drive-thru for digital orders, have further contributed to its success, especially during the pandemic.

Despite its strong performance, Chipotle does face challenges. Following the announcement that its former CEO was leaving for Starbucks, investors may feel uncertain about the future. Additionally, Chipotle's high valuation at 47 times forward earnings raises some eyebrows, particularly given the more modest growth in same-store sales.

While Chipotle has competitive advantages in its sector, the sustainability of its stock price remains a significant concern for investors looking for short-term gains.

Laffont, Nvidia, AMD, Chipotle, Investments