Billionaire Philippe Laffont runs Coatue Management, a hedge fund that beat the S&P 500 (^GSPC 1.22%) by 112 percentage points over the last three years. Beating the S&P 500 by any margin over an extended time period is impressive, but outperforming to that degree is astonishing.
Laffont made interesting trades in the fourth quarter. He sold 667,400 shares of Nvidia (NVDA 1.21%), a brand that has become synonymous with artificial intelligence. He also bought 10.2 million shares of Netflix (NFLX 0.20%), a company that completed a 10-for-1 stock split in November. The stock is up 20,000% since January 2006.
Here's what investors should know.
Image source: Getty Images.
Nvidia: The stock Philippe Laffont sold in the fourth quarter
Nvidia is well known for its graphics processing units (GPUs), chips that accelerate artificial intelligence (AI) and other complex data center workloads. The company holds about 90% market share in AI accelerators, a market projected to grow at 29% annually through 2033, but the company is truly formidable due to its full-stack strategy that spans adjacent hardware and software.
For instance, Nvidia develops Ethernet and InfiniBand networking solutions, and business is booming. It has won several major customers, like Alphabet's Google, Meta Platforms, and Oracle. And networking revenue soared 162% in the third quarter. Nvidia also has an unrivaled ecosystem of software development tools, which makes its hardware the default option for AI and other accelerated computing applications.
The upshot of the company's full-stack strategy is this: Nvidia can optimize performance and power efficiency at the system level rather than the component level, which results in a lower total cost of ownership (TCO) for customers. CEO Jensen Haung recently told analysts, "I'm very confident Nvidia's architecture is the best performance per TCO."
Additionally, Nvidia's addressable market is much larger than AI accelerators alone. Bernstein analysts estimate the company captures nearly 30% of total spending on AI data centers as profit -- not revenue, profit! Nvidia may see its margins decline modestly in the years ahead as competition intensifies, but the company is unlikely to lose its dominant position in AI infrastructure.
Wall Street estimates Nvidia's earnings will increase at 38% annually in the next three years. That makes the current valuation of 47 times earnings look attractive. So, why did Philippe Laffont sell shares in the fourth quarter? Perhaps he wanted to diversify his portfolio. But it would be wrong to assume he has lost confidence in Nvidia. It still ranks as his ninth largest holding.
NASDAQ: NVDA
Key Data Points
Netflix: The stock Philippe Laffont bought in the fourth quarter
Netflix announced a 10-for-1 split on Oct. 30, and completed the split on Nov. 14. Investors gravitate toward forward stock splits not just because they make shares cheaper, but also because they send a bullish signal: Splits are only necessary after substantial share price appreciation, and that rarely happens to poorly run companies.
Since 1980, companies' shares have added an average of 25% during the 12-month period after a stock split announcement, according to Bank of America. Netflix traded at $109 per share when it announced the split, so its price will increase 25% to $136 per share if its performance matches the historical average. That implies 76% upside from the current share price of $77.
Of course, how actual the stock actually performs depends on financial results and market sentiment, but investors have reason to be optimistic. Netflix is the most popular streaming service by multiple measures. It has more monthly active viewers and accounts for a larger percentage of viewing time than any competing service (excluding YouTube).
Also, Netflix original content consistently tops the charts. Stranger Things, Squid Game, and Wednesday were the three most popular original streaming series last year by viewing time, and Netflix produced all three. In fact, Netflix produced seven of the top 10 original streaming series in 2025, according to analytics company Nielsen.
Netflix stock is down 42% from its high because investors are worried about its $72 billion bid to acquire Warner Bros. Discovery, which owns HBO Max and franchises like DC Universe (Batman, Superman), Game of Thrones, and Harry Potter. But Benjamin Swinburn at Morgan Stanley said the risks had been discounted when Netflix hit $87 per share. The stock now trades at $77 per share
Many Wall Street analysts have lowered forward earnings estimates since the bid was announced, but the consensus still suggests Netflix's earnings will increase at 22% annually over the next three years. That makes the current valuation of 31 times earnings look reasonable (if not cheap). Patient investors should consider buying a position today.
