Coatue billionaire Philippe Laffont is dumping shares of Nvidia and Palantir and jumping into this artificial intelligence (AI) infrastructure juggernaut.

Thanks to the advent of the Internet, information is no longer as important to everyday investors. Between earnings season – the six weeks of each quarter when much of it S&P 500 When companies release their operating results and weekly economic reports, investors can become overwhelmed and allow important data to be leaked.

You may not realize it, but the most important data dump of the third quarter occurred in mid-August.

No later than 45 calendar days after the end of a quarter, institutional investors with assets under management (AUM) of at least $100 million must file Form 13F with the Securities and Exchange Commission. Simply put, a 13F tells investors what stocks Wall Street's smartest money managers bought and sold in the most recent quarter (in this case, the quarter that ended in June).

To put it bluntly: 13Fs are anything but perfect. They do not list short positions (if any) and because they are archived for up to 45 days after the end of a quarter, they may provide outdated information for active hedge funds. Nevertheless, they provide invaluable clues as to which stocks, industries, sectors and trends have the undivided attention of top-notch money managers.

While Berkshire Hathaway CEO Warren Buffett is probably the most followed money manager on Wall Street, but a number of other billionaire investors also draw the crowds, including Philippe Laffont of Coatue Management. Laffont and his team invest primarily in disruptive technology stocks and had nearly $25.7 billion in assets under management at the end of June.

But the real showstopper is what Laffont and his team have done with three of Wall Street's hottest artificial intelligence (AI) stocks.

Laffont's Coatue has been aggressively selling shares of Nvidia and Palantir

There have arguably been no two hotter AI stocks of late than the semiconductor giant Nvidia (NVDA -0.84%) and cloud-based data mining specialist Palantir Technologies (PLTR 4.49%).

Supernatural demand for AI graphics processing units (GPUs) has helped Nvidia reach a market value of more than $3 trillion since the start of 2023. Meanwhile, Palantir shares are up a whopping 601% in about 22 months. This growth was driven by the AI-driven Gotham platform, whose mission is to help federal governments plan and execute missions and collect data.

While both Nvidia and Palantir have competitive advantages and are irreplaceable, Laffont and his team at Coatue were key sellers of both stocks. Between March 30, 2023 and June 30, 2024, Laffont oversaw the sale of 72% of his fund's shares to Nvidia. By comparison, Coatue's brightest investment minds, including Laffont, divested their entire stake in Palantir (4,816,195 shares) in the final June quarter.

While profit-taking is a logical reason for this selling activity, there are other headwinds that may have encouraged Laffont and his investment advisers to jump ship.

History is the elephant in the room that cannot be ignored, especially when it comes to Nvidia. If you include the Internet in the mid-1990s, no breakthrough innovation or technology has avoided an early-stage bubble in three decades. In other words, investors have a terrible habit of overestimating how quickly disruptive technologies will become mainstream, and the companies leading these trends, like Nvidia, have historically done poorly.

In addition, Nvidia is facing a number of new competitors. Although external competitors are the focus, internal competition may be the greater concern. All four of Nvidia's largest customers by net revenue are developing their own AI GPUs, which could ultimately limit Nvidia's chance of winning valuable data center “real estate.”

As for Palantir, valuation may be the biggest concern for Coatue's investment team. Despite being irreplaceable at scale, Palantir deserves some valuation premium, but is now valued at 105 times forecast 2025 earnings per share (EPS) and a multiple of 29 times forecast revenue.

This is an extremely aggressive valuation considering Gotham's revenue cap is somewhat limited. This means that Palantir will only work with the US government and its allies, limiting the platform's reach beyond national borders.

But while Coatue's smartest investors were busy sending shares of Nvidia and Palantir into the ground, they were piling into another top artificial intelligence infrastructure provider.

Image source: Getty Images.

Laffont's stake in this leading AI infrastructure provider has risen more than 3,500% this year

In the June quarter, Laffont and his team made six new purchases and expanded 21 existing holdings. While most of these additions have been relatively small, Laffont's aggressive purchase of the world's leading chipmaker continues to stand out Taiwan semiconductor manufacturing (TSM 0.01%).

At the start of 2024, Coatue Management held just 312,466 shares of Taiwan Semi, which was the fund's 66th largest holding by market value. Six months later, it is the third largest holding with a total of 11,393,702 shares held. This represents an increase of more than 3,500% in total shares in the first half of 2024.

As you can imagine, the excitement surrounding Taiwan Semi is tied to its role in producing GPUs for AI-accelerated data centers. Orders for Nvidia's H100 GPU (commonly known as “Hopper”) and its successor GPU architecture (Blackwell) are backlogged, meaning Taiwan Semi should see long-term demand for its services.

For its part, Taiwan Semiconductor has proactively invested in its production capacity. While the company is targeting chip-on-wafer-on-substrate (CoWoS) packaging capacity of 80,000 wafers per month by 2026, at least one Wall Street analyst believes Taiwan Semi is a full year ahead of schedule. Packaging high-bandwidth storage is a cost-effective necessity for AI-accelerated data centers, meaning Taiwan Semi plays an important role in the supply chain.

While artificial intelligence is undeniably the wind in Taiwan Semiconductor's sails, Laffont and his team likely realize that production involves much more than just AI GPUs. For example, it is the company responsible for producing all of Apple's custom chips, including those used in its market-leading iPhone.

If history were to rhyme again and the AI ​​bubble did indeed burst at some point in the future, Taiwan Semi would be somewhat isolated in that it had several well-established distribution channels long before AI was the hottest thing since sliced ​​bread. While these other distribution channels do not offer the same growth potential as AI, a broad level of distribution diversity is ultimately positive for Taiwan Semiconductor.

Finally, Laffont and his advisers may be attracted to Taiwan Semi's still attractive valuation. Recognizing that forecasts can and do change, shares are valued at a multiple of 24 times forecast 2025 EPS, with revenue and earnings growth of more than 20%.