Billionaire Philippe Laffont Has Sold Shares of Nvidia for 8 Consecutive Quarters and Is Loading Up On This Historically Cheap Artificial Intelligence (AI) Stock Instead

Coatue Management, led by billionaire Philippe Laffont, has strategically reallocated its portfolio, reducing its Nvidia stake by 83% over two years amid concerns over AI market froth, increasing competition from client-developed chips, and Nvidia's high valuation (P/S > 30). Simultaneously, Coatue nearly 20x'd its position in Alibaba Group, drawn by its AI-driven cloud growth, strong e-commerce cash flow, robust capital return program, and attractive 11x forward earnings valuation. This move signals a pivot from high-flying, potentially overvalued AI leaders to cash-rich international companies with diversified AI growth prospects and compelling valuations.

Analysis

According to 13F filings, Coatue Management has executed a significant strategic pivot, signaling a bearish outlook on Nvidia (NVDA) while taking a strong bullish position on Alibaba (BABA). The fund's 83% reduction in its Nvidia stake over eight consecutive quarters suggests concerns beyond simple profit-taking, pointing to potential risks such as a historically high price-to-sales ratio of over 30, the threat of an AI bubble, and emerging competition from Nvidia's own customers developing in-house chips that could erode pricing power. Conversely, Coatue has aggressively built a position in Alibaba, increasing its stake nearly 20-fold. This move is supported by Alibaba's compelling fundamentals, including its dominant 41% share in Chinese e-commerce, a leading 33% share in China's cloud infrastructure market, and a robust capital return program fueled by a $51.6 billion cash position. The stark contrast in strategy highlights a rotation from a high-valuation, momentum-driven AI pure-play to an undervalued, cash-rich international conglomerate with diversified growth drivers and a low forward P/E ratio of 11.

Key Decisions for Investors

• Investors with heavy concentration in Nvidia should scrutinize the stock's valuation and monitor for signs of margin compression from customer in-house chip development, which are key risks highlighted by Coatue's selling.
• Consider initiating or increasing exposure to Alibaba, given its historically low valuation at 11 times forward earnings, dominant market positions, and significant AI growth potential within its cloud segment.
• It may be prudent to assess portfolio exposure to high-flying AI names and consider rebalancing towards fundamentally strong, cash-rich companies with attractive valuations, mirroring the strategic rotation undertaken by Coatue Management.