In this article, we discuss the top 10 tech stocks to buy according to billionaire Philippe Laffont.
Phillipe Laffont, a famous venture capital investor, started Coatue Management in 1999. He started working as an analyst for McKinsey and Company after receiving his Master’s in Computer Science from the Massachusetts Institute of Technology. Laffont is a major tech investor and his latest portfolio shows an overwhelming inclination towards the technology sector.
Phillipe Laffont believes in long-term investments and firmly believes in tech stocks. Nearly 64% of his hedge fund portfolio is comprised of tech stocks, followed by consumer goods at slightly over 13.5%. Talking at the Forbes and Shook Research Top Advisors Summit in Las Vegas in February 2018, the billionaire said:
“I truly believe that in every portfolio you need to ask yourself what is going to be more relevant 5 to 10 years versus today[…]The most interesting trend is that technology, which used to be mostly software and semiconductors and obscure things, it’s coming everywhere, it’s the future of cars and the future of transportation and every sector.”
For the current year, the technology sector has been doing remarkably well. The companies entering the new generative AI space have been seen to do better than others. Meta Platforms, Inc. (NASDAQ:META) is up over 100% year to date and Microsoft Corporation (NASDAQ:MSFT) and Alphabet Inc. (NASDAQ:GOOG) stocks have also fared well and are up 31.00% and 35.61% YTD, respectively. In an investor note, Wedbush analyst Dan Ives said:
“While the tech skeptics will continue to lay their cards on valuations, Fed narrative, next shoe to drop thesis (debt ceiling the latest fear), and fire in a crowded theater rinse and repeat thinking: we believe overall the set-up is for the tech sector to be up another 10%-12% the rest of the year.”
Phillipe Laffont’s Q1 Bets
In the last decade, Coatue Management has gained over 191.3% and has returned 18.58% in the last 12 months. In the first quarter of 2023, the hedge fund had $15.043 billion in managed 13F securities compared to $8.9 billion in the previous quarter. Over 64% of its value was concentrated in the top 10 stocks. The fund added 23 new stocks to its portfolio and increased holdings in 36 stocks. The most notable increase in holdings was made in QuantumScape Corporation (NYSE:QS), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), and The Walt Disney Company (NYSE:DIS) at 5700%, 3255%, and 1908%, respectively. In addition to that, Phillipe Laffont sold out of 21 stocks, including Broadcom Inc. (NASDAQ:AVGO) and Bath & Body Works, Inc. (NYSE:BBWI).
The top three stocks in Coatue Management’s portfolio in the first quarter were Meta Platforms, Inc., NVIDIA Corporation (NASDAQ:NVDA), and Tesla, Inc. (NASDAQ:TSLA).
Our Methodology
For this article, we picked the top 10 technology sector stocks from Coatue Management’s first quarter 2023 13F portfolio. We listed them in the ascending order of their value in the hedge fund’s portfolio.
10 Tech Stocks to Buy According to Billionaire Philippe Laffont
10. Lam Research Corporation (NASDAQ:LRCX)
Coatue Management’s Stake: $438.699 million
Lam Research Corporation (NASDAQ:LRCX) is a semiconductor company that supplies wafer fabrication equipment. The company is currently trading at a PE ratio of 15.5x which is quite low compared to the semiconductor industry average of nearly 21x.
Coatue Management was bullish on Lam Research Corporation in the first quarter and increased its holdings in the company by 73%. The company covered 2.91% of the hedge fund’s portfolio with 827,547 shares at a combined value of $438.699 million.
9. Alphabet Inc. (NASDAQ:GOOGL)
Coatue Management’s Stake: $518.99 million
Alphabet Inc. (NASDAQ:GOOGL) is the parent company of Google and its GOOGL ticker symbol represents the Class A shares of the company. The Class A shareholders have voting rights while the Class C shareholders do not.
On March 23, Jefferies analysts led by Brent Thill reiterated a Buy rating on Alphabet Inc.’s shares and raised the price target for the company to $150 from $130. The analyst is quite positive about the company’s AI prospects and believes that Alphabet Inc. is one of the companies with the least AI-related risk.
Coatue Management increased its stake in Alphabet Inc. by a whopping 1287% to over 5 million shares worth almost $519 million, representing 3.45% of its portfolio.
8. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Coatue Management’s Stake: $548.898 million
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s largest pure-play semiconductor foundry and was the first Taiwanese company to be listed on the NYSE.
Hedge funds were quite bullish on Taiwan Semiconductor Manufacturing Company Limited in the first quarter of 2023. The number of hedge fund holders of the company increased from 86 in Q4 2022 to 102 in Q1 2023. Coatue Management also initiated its position in Taiwan Semiconductor Manufacturing Company Limited in the same quarter with 5.9 million shares worth $548.898 million.
Wedgewood Partners made the following comment about Taiwan Semiconductor Manufacturing Company Limited in its Q1 2023 investor letter:
“Taiwan Semiconductor Manufacturing Company Limited contributed to performance as revenues grew +27% (in USD) from the year ago quarter. Despite this strength, the Company’s customers have seen near-term weakness in demand due to Covid-19 normalization as well as the launch timing of new products. However, the Company is well-positioned to continue a long-term growth trajectory because its leading-edge capacity is being absorbed by high-performance computing applications, particularly at nontraditional integrated circuit (IC) design houses, such as Apple, Alphabet and Amazon, which have become IC-design powerhouses over the past decade. Importantly, the Company’s aggressive investment in leading-edge equipment, tight development with fabless IC designers, and embrace of open development libraries, should continue to foster a superior competitive position and attractive long-term growth.”
7. Amazon.com, Inc. (NASDAQ:AMZN)
Coatue Management’s Stake: $571.172 million
Amazon.com, Inc. (NASDAQ:AMZN) is an American tech conglomerate and is one of the world’s most valuable companies. It is one of the American Big Five technology companies. The company stock is up by 36% year to date at the time of writing.
In the first quarter of 2022, Amazon.com, Inc. stock was held by 243 hedge funds, valued at $25.76 billion, and Harris Associates was the most prominent stakeholder in the quarter with 22.869 million shares worth $2.36 billion. Amazon.com, Inc. represented 3.79% of Coatue Management’s portfolio with nearly 5.53 million shares worth $571.172 million.
Polen Capital made the following comment about Amazon.com, Inc. in its Q1 2023 investor letter:
“We raised our position in Amazon.com, Inc.. During 2022, Amazon’s business experienced revenue deceleration from pre-pandemic levels combined with higher expenses resulting from inflation pressures as well as costs in their fulfillment segment. The fulfillment costs were set in motion during the pandemic when demand overwhelmed their network. More recently, AWS – along with Azure and GCP – experienced a deceleration in growth as customers globally feel pressure to optimize their usage in this tough macroeconomic environment. We don’t expect this deceleration to persist for the long-term given the secular trend of companies transitioning to the cloud.
For long-term investors, we believe this combination provides an opportunity and that Amazon is now poised to re-accelerate revenue growth, of which we are already seeing signs, while expanding margins and free cash flow. With respect to margins, given the fast growth in AWS and advertising, the latter generating almost $40 Billion in sales and growing at greater than 30% recently, the resulting mix-shift could result in operating margins of 10% or higher over time. This level would represent a 5x increase over 2022 levels. In sum, we are capitalizing on what we believe is arguably one of the most competitively advantaged business in the world, which is growing well, poised to accelerate that growth and expand margins, and is trading at an attractive price.”
6. Adobe Inc. (NASDAQ:ADBE)
Coatue Management’s Stake: $601.24 million
Adobe Inc. (NASDAQ:ADBE) is an American computer software company headquartered in California. The company has been covered by 23 Wall Street analysts and 10 of them maintain a Buy or Overweight rating while 13 analysts are keeping a Hold rating on the company stock.
Polen Capital made the following comment about Adobe Inc. in its Q1 2023 investor letter:
“One area we are watching regarding Alphabet and Adobe Inc. is AI systems and their capabilities, including generative AI. Interestingly, both Adobe and Alphabet could see benefits or threats from the emergence of generative AI and large language models (LLMs). Both companies already use generative AI to the benefit of their users in anticipating how content creators edit their work (Adobe) and in how search results are anticipated and generated (Google). At the same time, breakthrough technologies like AI can open the door to additional competition and/or impact a company’s profitability levels. We now see AI systems others are developing, including LLMs and generative AI offerings, that could be more competitive in the future. While we think it remains early days for ChatGPT and the capabilities of these types of LLMs and generative AI programs like DALL-E, the technology seems to be progressing at a fast rate and will at least require a strong response from incumbents.
As of now, we believe Alphabet and Adobe are leaders in their own right in these areas and have a clear path to improving their existing offerings with AI advancements, which would allow them to be net beneficiaries of AI. There are also significant barriers to building leading AI offerings in these areas. As a result, our position sizes in Adobe and Alphabet remain sizeable. For Adobe, the status of its pending $20 billion-plus Figma acquisition is also uncertain. There is a good chance, in our view, that it will be blocked by regulators, which would mean the future opportunity to expand its offerings to the developer community (beyond designers) may not occur.”
5. Block, Inc. (NYSE:SQ)
Coatue Management’s Stake: $678.436 million
Block, Inc. (NYSE:SQ) reported its first quarter 2023 results on May 5, reporting an EPS of $0.40 compared to $0.32 estimates and also outperforming the revenue estimates of $4.5 billion after generating $5 billion. The company updated its guidance after strong Q1 results and expects 2023 adjusted EBITDA of $1.36 billion compared to the prior $1.30 billion outlook. Previously, Block, Inc. was expecting an adjusted operating loss of $150 million and now expects it to be $115 million.
Coatue Management’s increased its stake in Block, Inc. by 84% and held 9.88 million of the company shares valued at $678.436 million in the first quarter of 2023.
4. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Coatue Management’s Stake: $833.787 million
Advanced Micro Devices, Inc. (NASDAQ:AMD) is an American semiconductor and consumer electronics company headquartered in California.
Coatue Management increased its holdings in Advanced Micro Devices, Inc. by 51% in the first quarter of 2023 to 8.5 million shares worth $833.787 million, covering 5.54% of the hedge fund’s portfolio.
Here is what Baron Funds had to say about Advanced Micro Devices, Inc. in its Q4 2022 investor letter:
“During the quarter, we added to our position in Advanced Micro Devices, Inc., a global fabless semiconductor company focusing on high performance computing technology, software, and products. AMD designs leading high-performance central and graphics processing units (known as CPUs and GPUs) and integrates them with hardware and software to build differentiated solutions for customers. While the company is seeing weakness in its PC business in the short term, we continue to believe AMD will be one of the lead beneficiaries of growing data center infrastructure spending driven by expanded use cases for AI and cloud computing across its product portfolio. AMD’s largest share gain opportunity is in its data-center-server CPUs, which continue to take share from incumbent Intel given a superior total cost of ownership proposition driven by better performance per watt of energy consumption across many computing workloads. We also believe Xilinx, a recent acquisition, offers AMD diversification opportunities through which it can benefit from the broader proliferation of semiconductors into all aspects of the industrial and consumer economies.”
3. Microsoft Corporation (NASDAQ:MSFT)
Coatue Management’s Stake: $909.88
Coatue Management’s doubled its stake in the tech giant Microsoft Corporation in the first quarter of 2023 to 3.156 million shares worth $909.88 million, making up 6.04% of the hedge fund’s portfolio.
On May 24, Mizuho analyst Gregg Moskowitz reaffirmed a Buy rating on Microsoft Corporation shares and raised his price target to $340 from $325. The analyst raised the company’s price target after attending the first day of the Microsoft Build conference and said that the event was “AI-heavy.”
In the first quarter of 2023, 289 hedge funds held Microsoft Corporation’s stock compared to 259 in the previous quarter. Bill & Melinda Gates Foundation Trust was the most prominent hedge fund holder in the first quarter with over 39 million shares worth $11.32 billion.
Fred Alger Management made the following comment about Microsoft Corporation in its Q1 2023 investor letter:
“Microsoft Corporation is a beneficiary of corporate America’s transformative digitization. Microsoft’s CEO expects technology spending as a percent of Gross Domestic Product (GDP) to jump from about 5% now to 10% in 10 years and that Microsoft will continue to capture market share within the technology sector. The company operates through three segments: Productivity and Business Processes (Office. LinkedIn, and Dynamics), Intelligent Cloud (Server Products and Cloud Services. Azure, and Enterprise Services), and More Personal Computing (Windows Devices, Gaming, and Search). While the company reported decent fiscal second quarter results, their investment in OpenAl’s ChatGPT captured the attention of investors. contributing to positive performance. Throughout the quarter. Microsoft surprised investors with continual rollouts of new Al capabilities across the company’s portfolio (e.g., Bing, GitHub. Teams, Office 365). Furthermore, the company announced Microsoft 365 Copilot, which leverages GPT-4, a large language model, combined with the Microsoft Graph of data to provide Al virtual assistance. We believe Microsoft’s investment in OpenAl provides a first-mover advantage in the Al transformer model space. Despite challenges in the early days of Al-powered applications, the pace of Al innovation is faster than any other enterprise technology previously observed, in our view.”
2. NVIDIA Corporation (NASDAQ:NVDA)
Coatue Management’s Stake:$1.383 billion
NVIDIA Corporation is an American technology company focusing on computer hardware/software, semiconductors, consumer electronics, and GPUs, among other things. The company represented 9.19% of Coatue Management’s portfolio with 4.98 billion shares valued at $1.383 billion.
Fred Alger Management made the following comment about NVIDIA Corporation in its Q1 2023 investor letter:
“NVIDIA Corporation is a leading supplier of graphics processing units (GPUs) for a variety of end markets, such as gaming, PCs, data centers, virtual reality and high-performance computing. The company is leading in most secular growth categories in computing, and especially artificial intelligence and super-computing parallel processing techniques for solving complex computational problems. Simply put. Nvidia’s computational power is a critical enabler of Al and therefore critical to Al adoption, in our view. As such, we believe Nvidia is a long-term high unit volume growth opportunity. During the period, NVIDIA reported fiscal fourth-quarter results that met expectations, as the company navigated. through an inventory correction associated with the broad macroeconomic slowdown. Moreover, management gave fiscal year earnings guidance that was better than analyst estimates. noting strong year-over-year growth in gaming and data centers. Management’s constructive assessment of 2023 prospects. coupled with the rapid rollout and adoption of generative Al offerings, led to positive share price performance.”
1. Meta Platforms, Inc. (NASDAQ:META)
Coatue Management’s Stake: $1.7 billion
Meta Platforms, Inc.’s focus on generative AI has proved significant for the company. The stock is up 114% year-to-date. Moreover, Meta Platforms, Inc.’s Reality Labs is also working on virtual and augmented reality advancements.
Artisan Partners made the following comment about Meta Platforms, Inc. in its Q1 2023 investor letter:
“Our top contributors in Q1 were Meta Platforms, Inc., Warner Bros Discovery (WBD) and FedEx. Following sharp declines in 2022, shares of Meta Platforms have more than doubled since their early November 2022 lows. Last year’s drawdown created a highly favorable risk-reward, which we took advantage of by adding to our position. Management has wisely, in our view, recalibrated its spending plans to focus on profitability amid a weaker advertising environment, increased TikTok competition and Apple’s privacy changes. While investors got ahead of themselves back in 2021, extrapolating pandemic growth rates into the future, Meta is still a highly successful enterprise generating over $120 billion of revenue annually on a run-rate basis and has more than $40 billion in cash on its balance sheet to help it navigate its future course. Recent usage and engagement trends for Facebook and Instagram have been positive, and Reels—Meta’s answer to TikTok—is gaining traction.”
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