Billionaire Philippe Laffont is a tiger cub, meaning he's part of an elite group of investors who worked for Julian Robertson's Tiger Global Management in the 1990s and then went on to found his own fund, Coatue Management. Laffont made early investments in TikTok's parent company ByteDance, Snap, Tesla, Meta Platforms, and Spotify, among others.
Needless to say, Laffont can typically spot the big tech trends before they happen, which is why investors are always so eager to get a glimpse into Coatue's portfolio each quarter. In the third quarter, Coatue trimmed its positions in CoreWeave (CRWV +3.53%), Tesla, and Nvidia (NVDA 1.06%), and invested in two recent initial public offerings.
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Pairing exposure to the artificial intelligence sector
Coatue appeared to follow the broader institutional investor landscape in the quarter, reducing its stake in several prominent artificial intelligence (AI) companies. Coatue sold 62% of its position in the AI data center company CoreWeave, 15% of its position in the electric vehicle and robotaxi company Tesla, and 14% of its position in the AI chip giant Nvidia.
In recent months, investors have become increasingly concerned about AI valuations, which have long been high, as well as the macroeconomic environment, with investors penciling in a smaller chance of another interest rate cut by the Federal Reserve in December. Furthermore, other AI concerns have emerged, including the large amounts of money the hyperscalers are spending to build out AI infrastructure, which is expected to be in the trillions over the next five years.
NASDAQ: CRWV
Key Data Points
Other well-known investors like Michael Burry have been more outspoken on social media regarding concerns over how large AI companies like Oracle and Meta Platforms are accounting for depreciation of semiconductors and servers, specifically as they extend the useful life of them, despite uncertainty about how long they will really last.
Other broader concerns that are coming into the spotlight are whether the U.S. can generate enough electricity to meet the demand for AI. Manufacturing AI chips also requires significant water usage, another issue related to the amount of resources needed to power AI.
Ultimately, it's difficult to predict what will happen next in terms of whether this marks the beginning of a pullback or a buy-the-dip opportunity. I don't think AI is about to become irrelevant, but the sector's path is unclear. Investors should be long-term-focused, and in my view, try to avoid some of the higher valuations out there, such as Tesla's.
Revealing positions in two IPOs
On its third-quarter 13F filing, Coatue reported positions in both the buy-now-pay-later (BNPL) company Klarna (KLAR +3.42%) and the collaborative design tech company Figma (FIG +2.20%), both of which were high-profile IPOs this year.
Figma went public with tremendous hype, opening at $33 per share and rising to a high of $143 per share, although it would be short-lived. The company essentially provides a Google Docs-like workflow for designers and coders to collaborate on a range of projects, allowing multiple people to work on designs that can be easily translated into code for website or app implementation. The company also has AI components and is being integrated as a third party into ChatGPT.
Coatue actually got involved in the company prior to the IPO, investing in it in 2024 at a $12.5 billion valuation. While selling the stock immediately following the IPO and the huge jump would have been a no-brainer, IPOs often contain lock-up provisions preventing this practice. At the end of the third quarter, Coatue held over 3.2 million shares.
Investors should still likely be wary of the stock, which has come down significantly after the initial IPO pop. Even at its current $18 billion market cap, Figma is still unprofitable and trades at over 17 times forward revenue.
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Key Data Points
Coatue also reported owning 330,000 shares of Klarna at the end of the third quarter. I haven't found any evidence that Coatue ever participated in a private financing round of Klarna prior to this report, although it's certainly possible. However, it's also possible that Coatue recently scooped up shares. Klarna's IPO also started hot, but has since fallen below its IPO price.
Klarna trades at a more reasonable valuation than Figma, at about 4 times forward revenue, but its losses have also risen significantly. BNPL companies are heavily impacted by the health of the consumer and the economy, so while the company has potential to disrupt the credit card space, I am still cautious on Klarna at this valuation.
