Billionaire Philippe Laffont Has a New No. 1 AI Stock After Selling Shares of Nvidia and Meta Platforms

There's nothing more valuable on Wall Street than data. One week ago, on Feb. 17, institutional investors with at least $100 million in assets under management filed Form 13F with the Securities and Exchange Commission. A 13F offers investors a snapshot of the stocks Wall Street's smartest money managers purchased and sold in the latest quarter.

Investors often pay close attention to 13F filings from billionaire investors, including Philippe Laffont of Coatue Management. Laffont has an affinity for companies at the forefront of game-changing technologies, such as artificial intelligence (AI). But he's not always a buyer of AI stocks, as the selling activity in Nvidia (NASDAQ: NVDA) and Meta Platforms (NASDAQ: META) during the fourth quarter showed.

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Although Nvidia or Meta have been Coatue's top holding in 10 of the last 12 quarters, there's a new No. 1 AI stock in Laffont's $40 billion portfolio.

Billionaire Philippe Laffont has been persistently paring down stakes in Nvidia and Meta Platforms

According to Coatue Management's 13F, its billionaire boss sold 667,405 shares of Nvidia and 253,768 shares of Meta during the fourth quarter.

But paring down these two positions has been a common theme. Laffont's stake in Meta has been reduced by 53% (4,279,854 shares) since March 30, 2023, while his fund's position in Nvidia has been slashed by 82% (40,598,682 split-adjusted shares) over the same period.

While both companies offer well-defined competitive advantages -- Nvidia's graphics processing units (GPUs) provide superior compute capabilities and Meta's social media assets are unmatched -- their respective shares have delivered outsize returns. Since the start of 2023, shares of Nvidia and Meta have skyrocketed by approximately 1,200% and 445%, respectively. Laffont has demonstrated a willingness to cash in his chips when presented with the opportunity.

It's also possible that Coatue's billionaire investor is worried about a potential AI bubble. Every next-big-thing trend over the past three decades has endured an early stage bubble-bursting event, triggered by investors grossly overestimating the adoption and/or optimization of a game-changing technology. Although demand for AI infrastructure is robust, it'll likely take years before companies optimize AI solutions to boost their bottom lines.

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Meet Coatue Management's new No. 1 AI stock: Taiwan Semiconductor

Including the purchase of 556,988 additional shares during the fourth quarter, world-leading chip fabricator Taiwan Semiconductor Manufacturing (NYSE: TSM) is Laffont's new top holding (and No. 1 AI stock).

Taiwan Semiconductor, commonly known as "TSMC," has undoubtedly benefited from the rise of AI. It's been expanding its monthly chip-on-wafer-on-substrate capacity at a breakneck pace to accommodate the insatiable demand for high-bandwidth memory packed with high-performance GPUs. As long as GPU demand outpaces supply, TSMC's backlog and pricing power should be robust.

The great thing about TSMC is that it's more than just an AI stock. It's also a leading provider of wireless chips used in next-generation smartphones, along with advanced chips for Internet of Things devices and automobiles. While these other segments aren't growing as swiftly as its AI-related operations, they nevertheless provide a solid floor and steady cash flow for the company.

Billionaire Philippe Laffont is likely also enticed by TSMC's valuation. The company's forward price-to-earnings ratio of 21 is reasonably cheap if it meets or exceeds consensus sales growth of 31% this year and 24% in 2027.

Sean Williams has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.