Major data releases are a common occurrence on Wall Street. Monthly inflation and employment reports, coupled with Wall Street’s leading companies reporting their operating results every quarter over a six-week period, can make it easy for important data to slip under the radar.
August 14 marked what could arguably be described as the most significant data dump of the third quarter. This was the last day for institutional investors and high-net-worth asset managers to file Form 13F with the Securities and Exchange Commission. A 13F details the stocks of Wall Street’s smartest and most successful money managers bought and sold in the last quarter (i.e. the quarter ending in June).
It was a particularly busy quarter of additions and subtractions for billionaire Philippe Laffont at Coatue Management. Laffont’s hedge fund, which focuses primarily on higher-growth technology stocks, oversees more than $25 billion in assets across 74 holdings.
The most notable thing about Laffont’s trading activity is his continued selling of former top positions Nvidia (NASDAQ: NVDA)as well as his purchase of shares in a company that is a leader in two sectors.
Laffont’s fund has lost almost three-quarters of its stake in Nvidia in fifteen months
As March 2023 came to an end, Coatue Management owned 49,802,020 shares of Nvidia stock, adjusted for the split. I say “custom split” because the king of artificial intelligence (AI) completed a historic 10-to-1 stock split in June 2024.
But when the curtain fell on the second quarter, Laffont’s fund owned “only” 13,754,447 shares of Nvidia. This represents a decline of 72% over a 15-month period, dropping Nvidia from Coatue’s top spot by market value to number 4.
Profit taking could explain some of Laffont’s continued selling. Since the start of 2023, Nvidia shares have risen nearly 750%, with the company gaining approximately $2.7 trillion in market value. We’ve never seen the valuation of a leading company grow so quickly, which may prompt Laffont and his team to pull out the stops.
But there may be more to this sale than meets the eye.
For example, every breakthrough innovation, technology, and trend since the advent of the Internet has weathered an early bubble. These bubbles consistently arise because investors overestimate how quickly a new technology or innovation will be adopted by consumers and/or businesses. Invariably, all these new technologies, innovations and trends take time to mature, which is seemingly never baked into investor expectations. More than likely, AI is the next in a long line of overhyped innovations that will take time to mature.
Furthermore, Nvidia’s management team and board of directors are not giving billionaires or ordinary investors any reasons to be excited. Since Chief Financial Officer Colette Kress in December 2020, no Nvidia insider has purchased shares of their company on the open market. Nearly four years without insider buying sends a crystal-clear message to Wall Street that stocks are not attractive.
Laffont and his advisers may also expect competitive pressure for Nvidia to increase in the coming quarters. A number of chipmakers have debuted or are developing AI graphics processing units (GPUs) that will compete directly with Nvidia’s popular H100 and the upcoming Blackwell GPU architecture.
Additionally, all four of Nvidia’s top customers by net revenue are developing their own GPU platforms in-house. Even if these customers choose to simply top up the Nvidia hardware they purchased, this seems to be a clear signal that future ordering options will be limited.
But while Philippe Laffont has dumped Nvidia stock, he has piled into a historically cheap company that sits at the top of the pecking order in two industries.
Billionaire Philippe Laffont can’t get enough of this historically low-cost leader in two industries
While Laffont and his team added to 21 existing positions and opened six more stocks in the quarter ending June, the purchase that really stands out is the 702,235 shares added to Coatue’s existing position in Amazon (NASDAQ: AMZN). Coatue’s approximately 10.77 million Amazon shares represent more than 7% of invested assets (as of June 30) and are the fund’s second-largest position by market value, behind only Metaplatforms.
Most investors are familiar with Amazon because it is the undisputed leader in e-commerce. In 2023, it accounted for almost 38% of the domestic online retail market share, which is more than 31 percentage points higher than Walmartwhich occupied the number 2 spot.
While Amazon’s e-commerce presence is the face of the company, attracting more than 3 billion visitors every month, online retail sales generate inferior margins and minimal operating cash flow. Most of what makes Amazon special comes down to its three supporting operating segments, none of which are more important than Amazon Web Services (AWS).
According to data from technology analytics firm Canalys, AWS accounted for 33% of global spending on cloud infrastructure service platforms in the quarter ended June. This is well above the 20% market share Microsoft‘s Azure, the second largest provider of cloud infrastructure services.
Spending on enterprise cloud services is still in the relatively early stages of expansion. Additionally, the AI ​​revolution is generating a lot of interest in generative AI solutions and large language models, which are being incorporated into AWS for customers. AWS consistently accounts for 50% to 100% of Amazon’s operating revenue on a quarterly basis and is responsible for a significant percentage of the company’s rapid cash flow growth.
The other two support segments of interest include advertising services and subscription services. With more than 3 billion visitors per month and a growing content library, Amazon has no trouble controlling strong advertising pricing.
Meanwhile, Amazon recently signed an 11-year streaming rights deal with the NBA and WNBA, and is the exclusive streaming partner of the NFL. Thursday night football. Securing popular sports packages will only increase the value of Prime subscriptions.
The final piece of the puzzle that seems to make Laffont favor Amazon over Nvidia is its historically cheap valuation. During the 2010s, investors paid an average of 30 times cash flow to own Amazon stock. As of this writing, on September 26, the shares are valued at less than 13 times 2025 cash flow.
With a valuation more compelling than any other point in its publicly traded existence, Amazon has the tools and intangibles needed to surpass Nvidia in the returns department.
Should You Invest $1,000 in Amazon Now?
Before you buy stock in Amazon, consider this:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $743,952!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns September 23, 2024
Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Sean Williams holds positions at Amazon and Meta Platforms. The Motley Fool holds positions in and recommends Amazon, Meta Platforms, Microsoft, Nvidia, and Walmart. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Billionaire Philippe Laffont sold 72% of Coatue’s stake in Nvidia and pounced on the historically low-cost leader in two sectors. originally published by The Motley Fool
