The S&P 500 (^GSPC -0.01%) roared higher over the past couple of years, and though many stocks contributed, one particular group is seen as the leader of that movement. I'm talking about the "Magnificent Seven," a group of supercharged tech stocks that dominate in the world's highest-growth industries, from artificial intelligence (AI) and cloud computing to autonomous vehicle technologies. These players have seen both revenue and their stock prices soar thanks to their innovation and leadership.
But one particular stock just showed the world you don't have to be a member of this elite group to deliver fantastic returns to investors, and it hasn't escaped the attention of a certain billionaire: Philippe Laffont of Coatue Management saw the stock's potential early on, buying shares of this company hand over first in the first quarter. Let's meet this AI stock that's greatly outperformed every member of the Magnificent Seven so far this year.
Image source: Getty Images.
Laffont's focus on technology
First, though, let's consider why Laffont's interest in the stock is important. Laffont oversees more than $22 billion in 13F securities, or positions that must be reported on a quarterly basis to the Securities and Exchange Commission. Managers of more than $100 million in U.S. securities must file form 13F, and this is great for us because it offers us a glimpse into the most successful investors' strategies and latest moves.
Laffont is a "Tiger Cub," or former employee of renowned hedge fund Tiger Management who went on to create a new fund. He started Coatue in 1999 and is heavily invested in tech stocks, with his top holdings Meta Platforms, Amazon, and Taiwan Semiconductor Manufacturing. So Laffont has a certain interest and expertise in technology -- including AI -- companies, which makes it interesting to consider his moves in the industry and examine whether they may be right for us.
And this brings us to the subject of the Magnificent Seven-beating stock. This player is CoreWeave (CRWV -6.95%), a company that launched its initial public offering in late March and since that time has soared more than 250%. Here's a look at its performance compared to Magnificent Seven stocks so far this year:
In the first quarter, Laffont scooped up 14,402,999 CoreWeave shares, giving it a weight in the portfolio of almost 2.4% and the position of 16 out of a total 70 holdings. Laffont already has benefited from the investment, considering the stock's performance so far, and this performance is for a very good reason: CoreWeave's revenue is on fire.
A revenue increase of more than 400%
The company reported a revenue increase of more than 400% in the recent quarter, driven by high demand for its AI platform. So, what exactly is CoreWeave's business?
The company sells customers access to something greatly needed in the AI boom, and that's compute. CoreWeave has invested in a fleet of more than 250,000 Nvidia graphics processing units (GPUs) -- the top chips powering crucial AI tasks -- across dozens of data centers. Customers can rent access to them as needed, even by the hour. This flexibility, as well as CoreWeave's focus and expertise in AI workloads, has helped it grow in this dynamic market.
And even market giant Nvidia believes in the CoreWeave story, as it holds a 7% stake in the company.
All this sounds great -- so should you follow Laffont into this potential AI winner?
CoreWeave faces some headwinds, such as competition from big cloud players like Amazon Web Services and the fact that it must invest heavily in order to keep growth going -- and this may make it difficult to reach profitability. This means CoreWeave isn't the best choice for cautious investors right now. But if you're a growth-focused investor who doesn't mind some risk, you may consider this player that Laffont and Nvidia both love, as it may be well positioned for soaring revenue growth in the quarters to come -- and might even continue to offer the Magnificent Seven players a run for their money when it comes to stock performance.
