Philippe Laffont is one of the best portfolio managers at identifying and investing in major technology trends. His fund company, Coatue Management, invests billions across public and private markets. Its funds include over $39 billion of publicly traded U.S. equities as of this writing, and over 20% of that is held in just three stocks offering a smart way to play the continued growth in artificial intelligence (AI).
While chipmakers like Nvidia and Broadcom often capture investors' attention, Laffont has made even bigger bets on companies further up the supply chain that provide essential tools and services for those chipmakers. These three stocks stand to benefit from the growing spending on AI compute, no matter who designs the chips that end up in data centers.
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1. Taiwan Semiconductor Manufacturing (8.5% of assets)
Taiwan Semiconductor Manufacturing (TSM 4.44%), known as TSMC, is the world's largest contract chip manufacturer by a wide margin. Its market share climbed to 72% of all foundry spending in the third quarter, driven by its advanced chip capabilities. Those high-end GPUs and XPUs designed by Nvidia and Broadcom all use TSMC's technology and manufacturing services.
With demand continuing to soar in 2026, TSMC is poised for another strong year of growth. Management provided a forecast of 38% revenue growth in the first quarter and 30% for the full year. That's supported by price increases for its most advanced manufacturing processes, as it works to build out manufacturing capacity as quickly as possible. The price hikes, combined with scaling its 3-nanometer process, should drive strong gross margin expansion, partially offset by increased depreciation expense from its ongoing capital expenditures.
NYSE: TSM
Key Data Points
To that end, the company is looking to capitalize on the massive opportunity in front of it. Management plans to spend between $52 billion and $56 billion in capital expenditures to build out new manufacturing facilities. That's a 32% year-over-year increase at the midpoint.
Long-term, management expects compound annual revenue growth of around 25% between 2025 and 2029. Despite a very strong start to that period in 2025, there's still a lot of growth left for the business over the next four years. Management's outlook implies average revenue growth of 20% from 2027 through 2029, following its 30% growth in 2026. That should come with expanding margins as it exercises pricing power and scales new processes.
With the stock trading at 27 times forward earnings, shares still look undervalued at today's price, given investors can expect earnings growth in the 20% range through the end of the decade.
2. Lam Research (6.1% of assets)
Lam Research (LRCX 3.29%) provides wafer fabrication equipment for semiconductor manufacturers. Its equipment is particularly strong for logic and memory chips, including both NAND and DRAM, which have both seen a spike in demand over the last year.
Lam is poised to benefit from the massive increase in capital expenditures from chip manufacturers. That includes TSMC, as mentioned above, as well as memory chipmakers like Micron Technology and SK Hynix for DRAM. Micron plans to spend $20 billion on capital expenditures this year, up more than 25% year over year. SK Hynix will spend a similar amount, boosting its spending by 30%. Lam's management expects its wafer fabrication equipment sales to climb 23% during calendar year 2026 as a result, driven by greater than 40% growth in its advanced packaging business for chips like high-bandwidth memory.
NASDAQ: LRCX
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The semiconductor industry can be cyclical, especially the memory chip market, where Lam is overweighted. That said, its services segment provides a stable and growing revenue base, which brought in $2 billion last quarter, up from $1.75 billion the year before.
The stock ended 2025 trading at a forward P/E ratio of 32, which is a fair price given the expected increase in spending on memory chips over the next couple of years. However, investors have bid up the stock amid the memory chip shortage, and shares now trade for 46 times forward earnings. The stock looks expensive now, and it wouldn't be a surprise to see Laffont take some money off the table after the run-up in the share price in early 2026.
3. Applied Materials (5.8% of assets)
Applied Materials (AMAT 3.71%) also makes wafer fabrication equipment, maintaining strong positions across a wide range of products for etching, deposition, and process control. Its broad portfolio means it competes with Lam Research, along with practically everyone else in the industry, for placement in foundries.
Applied Materials' advantage is its scale. As the largest wafer fabrication equipment provider, it generates more revenue than anyone else. That allows it to invest more in research and development and bring more advanced products to market before its competitors. That can help it grow its market share, feeding the virtuous cycle. For reference, it spent $3.6 billion on research and development last year compared to $2.3 billion for Lam Research.
NASDAQ: AMAT
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Management echoed Lam Research's 20% equipment revenue growth outlook for 2026 when it released earnings results in mid-February. With TSMC's long-term outlook improving, investors can expect similar results in 2027. That said, Applied remains susceptible to the cyclical forces in the semiconductor industry.
The stock has climbed considerably in recent months, but it still looks like a good value, especially when compared to Lam Research. Shares currently trade for 34 times forward earnings expectations. Looking out to 2027, that multiple drops to 27. That's a fair price for the stock, given the growth it should exhibit over the next couple of years.
