The amount of data at investors' fingertips can sometimes feel overwhelming. Between a steady stream of economic data releases and earnings season -- the six-week period each quarter where most S&P 500 (^GSPC 0.38%) companies report their operating results -- it can be easy for something important to fall through the cracks.
Case in point: While some folks were focused on making their significant other feel special on Valentine's Day, institutional investors were spilling the beans on their trading activity during the December-ended quarter.
Image source: Getty Images.
No later than 45 calendar days following the end of a quarter, institutional investors with at least $100 million in assets under management (AUM) are required to file Form 13F with the Securities and Exchange Commission (SEC). This form, which details buying and selling activity, was due on Feb. 14.
Although Warren Buffett's trading activity at Berkshire Hathaway tends to be closely monitored, he's far from the only billionaire investor that generates sizable returns in the stock market. Coatue Management's billionaire fund manager Philippe Laffont, who's overseeing close to $30 billion in AUM, is no slouch.
Laffont is a particularly interesting billionaire investor to monitor, given his penchant for high-growth tech stocks and companies involved in the artificial intelligence (AI) revolution.
During 2024, Laffont repeatedly pared down Coatue's stake in AI leader Nvidia (NVDA +1.80%), but closed out the year by piling into a polarizing AI stock that's gained close to 6,700% since its initial public offering (IPO).
Philippe Laffont slashed his fund's stake in Nvidia by more than three-quarters
When 2024 began, Coatue Management was holding 43,222,010 split-adjusted shares of Nvidia. The "split-adjusted" aspect takes into account that Nvidia completed its largest-ever forward split (10-for-1) in June. But when the curtain closed on Dec. 31, just 10,006,488 shares remained. This roughly 33.2 million-share reduction works out to a 77% haircut in 12 months.
One possible explanation for Laffont's persistent selling of Nvidia stock throughout 2024 is that he was simply ringing the register. Laffont and his top advisors run a relatively active hedge fund, with the average holding period of Coatue's top-20 positions clocking in at approximately seven quarters (21 months). With Nvidia stock rising tenfold since 2023 began, locking in gains was likely viewed as a smart move.
NASDAQ: NVDA
Key Data Points
What's worrisome is that Laffont's ongoing exit from Nvidia might have to do with far more than just profit-taking.
For instance, there's genuine concern about how President Donald Trump's trade policies and tariffs might impact Nvidia. Trump has already implemented a 10% tariff on Chinese imports and is threatening to place at least a 25% starter tariff on foreign semiconductor imports. Even though Nvidia doesn't import from China, the world's No. 2 economy is one of its top-dollar markets. The potential for strained trade relations with China, retaliatory tariffs, and tariffs on key suppliers (e.g., Taiwan Semiconductor Manufacturing) may squeeze Nvidia's margins and lower its sales.
To build on this point, the Biden administration restricted exports of high-powered AI chips and related equipment to China from 2022 through 2024. President Trump seems likely to maintain this stance in an effort to protect America's intellectual property. In short, this is bad news for Nvidia, which continues to count on big orders from China.
Steadily increasing competitive pressure is another genuine worry for Nvidia. While most investors are focused on graphics processing unit (GPU) makers ramping up production, the biggest threat to Nvidia's AI-data center dominance may come from within. Many of its top customers by net sales are internally developing AI chips to deploy in their data centers. Even if these chips serve a complementary function, their existence will reduce available data center space for Nvidia's hardware and eventually weigh on the company's pricing power and margins.
The potential final concern for Coatue Management's billionaire chief is that next-big-thing trends have a poor early-inning track record. This is to say, every game-changing innovation/technology for the last three decades has navigated its way through a valuation bubble that eventually burst. All technologies need time to mature, and there's nothing to suggest AI is close to being optimized by businesses.
Image source: Getty Images.
Laffont is piling into this highly volatile (and rapidly growing) AI infrastructure stock
Throughout 2024, Laffont oversaw the addition of roughly two dozen new stocks to Coatue Management's fund. While quite a few of these stocks are fueled by the evolution of AI, perhaps none is more of an eyebrow-raiser than customizable rack server and storage solutions specialist Super Micro Computer (SMCI 3.19%), commonly referred to as Supermicro.
During the December-ended quarter, Laffont opened a new position in Supermicro to the tune of 8,866,735 shares, which, if unchanged, would be worth north of $525 million, as of Feb. 20.
On paper, Super Micro Computer has plenty of appeal. Businesses are throwing cash at AI investments in an attempt to front-run their competitors. But in order to do so, they need the physical infrastructure that's necessary for split-second decision-making, running generative AI solutions, and training large language models. Supermicro's customizable rack servers incorporate Nvidia top-notch Hopper GPUs, which has made the company a leading infrastructure player.
The growth is also there. After delivering 110% net sales growth in fiscal 2024 (ended June 30), the company's fiscal second-quarter preliminary guide is for net sales of $5.6 billion to $5.7 billion, which equates to 54% year-over-year revenue growth at the midpoint. Commentary from management suggests full-year sales could catapult from a range of $23.5 billion to $25 billion in fiscal 2025 to $40 billion in fiscal 2026.
NASDAQ: SMCI
Key Data Points
But Supermicro isn't without its helping of controversy, which explains why its stock has been so volatile over the last year.
Last August, noted short-seller Hindenburg Research released a report that alleged "accounting manipulation" at Super Micro Computer. This stunning allegation was followed up by the company delaying the filing of its annual report with the SEC, an announcement from The Wall Street Journal that the company was being probed by regulators at the Justice Department, and the resignation of Ernst & Young as Supermicro's accounting firm.
The silver lining for Super Micro Computer's shareholders is that an internal probe -- the findings of which were released in early December -- found no evidence of fraud or misconduct on the part of management, and there was no expectation of restating its quarterly filings with the SEC.
Yet as of this writing, Supermicro hasn't yet submitted its annual filing from June 30, or its operating results from the fiscal first quarter. While the company's growth story looks impressive on paper, the caution tape and warning flags simply won't go away.
