Billionaire Philippe Laffont Is Selling AMD and Buying This AI Chipmaker He Thinks Can Quadruple in 5 Years (Hint: Not Nvidia)

Charlie Munger had a cheat code for finding great investment ideas: "Looking at what other smart people are buying."

Luckily, finding what other smart people are buying has become much easier over time. From the introduction of required SEC disclosures to the advancements of the internet putting that information at everyone's fingertips, you can get a peek at what some of the top investment managers are buying and selling.

One manager worth following is Philippe Laffont, who runs the hedge fund Coatue Management. The fund's publicly traded equity portfolio outperformed the S&P 500 by about 95 percentage points during the three-year period that ended in June, based on public filings. The fund's most recent 13F filing with the SEC revealed Laffont's continued sale of leading GPU-maker Advanced Micro Devices and a new position in one semiconductor stock he thinks can more than quadruple by 2030.

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Trimming a former top holding

Laffont bulked up his position in AMD in late 2022 and early 2023, as the popularity and potential of generative AI became clear. At one point, AMD was Coatue's third-largest publicly traded equity position. But since reaching a peak in mid-2023, Laffont has trimmed 89% of his position in the GPU maker.

To be fair, AMD isn't the only GPU maker Laffont's trimmed after seeing the stocks soar amid the AI boom. Coatue cut its stake in Nvidia by about 77% since early 2023. However, he added some shares back last quarter while trimming Coatue's remaining stake in AMD by another 53%.

The timing wasn't exactly great for Laffont. Shares of AMD have outperformed Nvidia since the end of June, receiving a huge boost from a new deal with OpenAI to buy up to 6 gigawatts of AMD GPUs over a multiyear period. AMD will provide OpenAI with warrants to buy shares for each gigawatt of GPUs it buys, effectively providing a discount on its GPUs, but garnering a major customer and investor.

AMD's OpenAI deal is a vote of confidence in its forthcoming MI450 GPU platform, which AMD's management says will be able to outperform Nvidia's Rubin platform in both training and inference. If true, AMD could find its chips taking significant share in the data center market at Nvidia's expense.

Meanwhile, one of Laffont's biggest purchases last quarter was a new position in another chip stock that hasn't quite kept up with the GPU giants. But Laffont and his team think the long-term potential could be huge.

The newest chip stock in Coatue's portfolio

Laffont likes to take long-term outlooks on many stocks. The payoff for being right about an industry or company can be absolutely massive. Such is the case with his newly established position in Arm Holdings (NASDAQ: ARM).

Laffont sees Arm Holdings' market cap climbing to $787 billion by 2030, up from its current market cap of about $179 billion. That's a 340% increase in just five years.

Arm doesn't design chips itself. It provides a basic chip architecture for other chip designers to build on top of. It found a lot of success in the smartphone market, where energy efficiency was key. Now, it's looking to take share in the data center space, where energy efficiency is a growing concern, as energy supply could be the limiting factor in scaling data center compute power.

Arm is making strong progress, with 70,000 enterprises using its data center chips, up 14-fold since 2021. That's helped by Nvidia, which built its Grace CPU for its Hopper and Blackwell server racks using Arm's intellectual property. However, a recent deal between Nvidia and Intel may shift the GPU-leaders' focus to Intel's x86 architecture instead. Still, the Nvidia chip provides a clear example of the value Arm brings to other GPU makers and hyperscalers.

Not only is Arm taking market share in the valuable data center space, it's commanding greater pricing power for its latest-generation architecture. Royalty revenue increased 25% year over year in the first quarter. That's driven by higher royalty rates for its v9 architecture and other licensed IP. As companies adopt its newest architecture, it should result in strong revenue and earnings growth over the next few years. Laffont is betting that will send shares skyrocketing.

The one knock against Arm stock right now is its valuation. Shares trade for nearly 100 times forward earnings estimates. While it should see significant earnings growth over the next few years, that's a tough valuation to justify. Laffont seems to think it's worth the price, but shares look very risky right now.

Adam Levy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool recommends the following options: short November 2025 $21 puts on Intel. The Motley Fool has a disclosure policy.