Charlie Munger had a unique strategy for uncovering promising investments: "Observing the choices of other intelligent investors."
Fortunately, discovering what top investors are purchasing has become significantly simpler over the years. With mandatory SEC filings and the internet making this data widely accessible, anyone can now see which stocks leading fund managers are buying or selling.
One notable investor to keep an eye on is Philippe Laffont, who leads the hedge fund Coatue Management. According to public records, the fund’s equity portfolio outperformed the S&P 500 by roughly 95 percentage points over the three years ending in June. The latest 13F report filed with the SEC shows that Laffont continued to reduce his stake in Advanced Micro Devices, a major GPU producer, while initiating a new investment in a semiconductor company he believes could increase more than fourfold by 2030.
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Reducing a previous major holding
Laffont significantly increased his AMD holdings in late 2022 and early 2023, as the excitement around generative AI grew. At its peak, AMD was Coatue’s third-largest equity position. However, since mid-2023, he has cut his AMD stake by 89%.
It’s worth noting that AMD isn’t the only GPU stock Laffont has scaled back on after their prices surged during the AI rally. Coatue reduced its Nvidia position by about 77% since early 2023. Last quarter, he bought back some Nvidia shares but further trimmed AMD by another 53%.
Laffont’s timing wasn’t ideal. Since June, AMD’s stock has outperformed Nvidia, largely thanks to a major agreement with OpenAI to supply up to 6 gigawatts of AMD GPUs over several years. In exchange, AMD will grant OpenAI warrants to purchase shares for each gigawatt of GPUs acquired, effectively offering a discount while securing a key customer and investor.
This partnership with OpenAI signals strong confidence in AMD’s upcoming MI450 GPU line, which company leadership claims will surpass Nvidia’s Rubin platform in both training and inference tasks. If these claims hold, AMD could capture a larger share of the data center market, potentially at Nvidia’s expense.
At the same time, one of Laffont’s largest recent buys was a new stake in a different semiconductor company that hasn’t matched the growth of the GPU leaders. Still, Laffont and his team see enormous long-term potential.
The latest chip company in Coatue’s holdings
Laffont often invests with a long-term perspective. The rewards for correctly predicting an industry’s trajectory can be substantial. This approach is evident in his new position in Arm Holdings ( ARM 11.03%).
Laffont projects that Arm Holdings’ market value could reach $787 billion by 2030, up from its current $179 billion—a 340% increase over five years.
Arm doesn’t manufacture chips itself. Instead, it develops foundational chip architectures that other companies use as the basis for their own designs. Arm achieved major success in the smartphone sector, where energy efficiency is crucial. Now, it’s targeting the data center market, where power consumption is becoming a critical issue as energy availability may limit data center expansion.
Arm is making notable headway, with 70,000 businesses now using its data center chips—a 14-fold increase since 2021. Nvidia has contributed to this growth by utilizing Arm’s technology in its Grace CPU for Hopper and Blackwell server systems. However, a recent collaboration between Nvidia and Intel could shift Nvidia’s focus toward Intel’s x86 architecture. Nevertheless, Nvidia’s use of Arm demonstrates the value Arm offers to GPU manufacturers and large-scale cloud providers.
Arm is not only gaining ground in the lucrative data center sector, but it’s also achieving higher prices for its latest architecture. Royalty income jumped 25% year over year in the first quarter, driven by increased rates for its v9 architecture and other licensed technologies. As more companies adopt its newest designs, Arm is positioned for robust revenue and profit growth in the coming years. Laffont is betting this will propel the stock much higher.
The main concern with Arm’s stock at the moment is its valuation. Shares are trading at nearly 100 times projected earnings. Although significant profit growth is expected, such a high valuation is difficult to defend. While Laffont appears to believe the premium is justified, the stock currently carries considerable risk.
