One of Philippe Laffont’s action picks?

We recently made a list The 10 Best ‘AI-Based’ Stocks According to Billionaire Phillipe LaffontIn this article, we take a look at how Advanced Micro Devices, Inc. (NASDAQ:AMD) compares to Philippe Laffont’s other stocks.

Billionaire Philippe Laffont is the founder and portfolio manager of Coatue Management, LLC. His fund’s top 10 holdings are mostly technology stocks, reflecting his love of technology. His passion for technology was so strong that after graduating from MIT with a degree in computer science, he applied multiple times for a job at Apple, but was rejected each time. This led him to another calling, managing a hedge fund and its holdings.

Philippe Laffont’s journey towards investing began when he moved to Spain to work at McKinsey. During this time, he learned about the “PC boom” and the three pioneers of the PC industry, namely IBM, Dell, and Microsoft. He decided to invest in these stocks, which made more money than he was earning at the time. This led to his endeavors as an investor. In order to learn more about being an investor, he got a chance to work at an investment fund without a salary, where he learned different terminology related to the industry to “get his foot in the door.”

After leaving Julian Robertson’s organization, he began raising funds to start investing from his friends and family, but most of the funds came from professional brokers and people who admired his entrepreneurial spirit. This led to his company being launched on January 1, 2000 with $50 million at its disposal, and the fund’s AUM is now $50 billion. His investment philosophy is to provide investors with long-term and good returns; and to have investors bet on him for the long term. Philippe Laffont’s philosophy of helping people is evident in his efforts to advise people on investing, and he believes in helping every new tech “child” that has the potential to become the next TikTok.

In an interview with Bloomberg Invest, Philippe Laffont said he is torn about whether small or large companies will be the winners in AI. He says the history of technology suggests that large companies get bigger, but new companies like Facebook and TikTok have also found success. He believes AI is not overhyped and valuations are not currently unstable. Here is what he said:

“It’s true that AI is mentioned a lot in every TV and written form. And so you can say, Wow, if everyone’s talking about it, then it must be included. And the only reason that’s more positive is because I remember investing in Apple in 2009 when the iPhone first came out and over the years people have said to me, Why are you investing in Apple? Everyone’s talking about Apple. And of course it’s had an incredible run. So I actually think that sometimes when someone talks about something a lot, it can be a good sign, not an overly hyped sign.”

Philippe Laffont believes the next phase of AI will be real estate with data centers and especially utilities with power. Another phase of AI, according to Philippe Laffont, will be robots with artificial brains called humanoids. The technology hedge fund manager also made the following prediction, which has huge implications for semiconductor stocks:

“I made a lot of mistakes. You know, betting on these new technologies like AR/VR turns out not to be that big. 3D printing turns out not to be that big. My view is that $100 trillion in today’s dollar has been invested in PC-based and CPU-based infrastructure. All of that is going to be ripped out to put $100 trillion or more into our GPU-based infrastructure.”

Our methodology

The stocks mentioned in this article were selected from Coatue Management’s investment portfolio at the end of the first quarter of 2024. To provide readers with a more comprehensive overview of the companies, analyst ratings for each company are listed alongside other details. A database of approximately 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2024 was used to determine the popularity of each stock in the hedge fund universe.

Close-up of a complex PCB with several integrated semiconductor components.

Advanced Micro Devices, Inc. (NASDAQ:AMD)

According to Citi Bank analysts, Advanced Micro Devices, Inc. (NASDAQ:AMD) The data center GPU market share is expected to grow 10% to $15 billion. Citi analyst Christopher Danely also gave the stock a Buy rating, setting a price target of $176.

Coatue Management owns about 6.7 million AMD shares worth $1.2 billion. Among the hedge funds tracked by Insider Monkey, Texas-based investment firm Fisher Asset Management is the leading shareholder in Advanced Micro Devices, Inc. (NASDAQ:AMD) with 28 million shares worth more than $5 billion.

The current Advanced Micro Devices, Inc. (NASDAQ:AMD) earnings per share forecast for 2025 was for the stock to trade at a P/E ratio of around 28.6X, which is on the lower side considering that Wall Street analysts are expecting Advanced Micro Devices, Inc. (NASDAQ:AMD) to grow 33% this year and 59% next year.

In its fourth quarter 2023 investor letter, Meridian Contrarian Fund provided the following information regarding Advanced Micro Devices, Inc. (NASDAQ:AMD):

“Advanced Micro Devices, Inc. (NASDAQ:AMD) is a global chipmaker specializing in central processing units (CPUs), which are considered the core component of most computing devices, and graphics processing units (GPUs), which accelerate operations performed on processors. We invested in 2018 when it was a mid-cap company that had been struggling for years due to technology delays and had lost market share to competitors Intel and Nvidia. Our research showed that the changes and investments made by the current management team, led by CEO Lisa Su, over several years ultimately resulted in a compelling technology that made AMD a stronger competitor to Nvidia, and its latest products were superior to Intel’s. We invested on the belief that AMD’s valuation at the time did not reflect the potential for its technology leadership to generate significant market share and earnings gains. This thesis has held true for several years. AMD revealed more details about its upcoming GPU products for the AI market during the quarter. The stock responded positively to expectations that AMD’s server GPUs would be a viable alternative to Nvidia. While we have limited our exposure to AMD to strength as part of our risk management practices, we have maintained our position in the stock. We believe AMD will continue to gain share in large and growing markets and is reasonably valued relative to the potential for significantly higher earnings.”

AMD Total takes 8th place on our list of billionaire Phillipe Laffont’s best stocks. You can visit The 10 Best ‘AI-Based’ Stocks According to Billionaire Phillipe Laffont to see other stocks that are on the hedge fund radar. While we recognize AMD’s potential as an investment, our belief is based on the belief that AI stocks offer a better chance of achieving higher returns in a shorter time frame. If you’re looking for AI stocks that are more promising than AMD but are trading at less than 5 times earnings, check out our report on cheapest AI action.

READ NEXT: Analyst Sees New $25 Billion ‘Opportunity’ for NVIDIA, and Jim Cramer Recommends These 10 Stocks for June

Disclosure: None. This article was originally published on Insider Monkey.