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Decoding Investor Moves: The Less Talked-About Shifts of 2024
Investors today have access to a flood of information, making it challenging to notice key developments. As earnings season rolls around each quarter, many S&P 500 (SNPINDEX: ^GSPC) companies report their financial results, leading to potential oversights.
For instance, while many were celebrating Valentine’s Day, institutional investors were busy revealing their trading activities for the quarter that ended in December.
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Institutional investors with at least $100 million in assets are required to file Form 13F with the Securities and Exchange Commission (SEC) within 45 days after each quarter ends. The latest filings were due on February 14.
Although Warren Buffett’s trading at Berkshire Hathaway garners much attention, he’s not the sole billionaire making noteworthy market moves. Philippe Laffont, who manages nearly $30 billion at Coatue Management, is another prominent figure to watch.
Laffont is particularly interesting because of his focus on high-growth tech stocks, especially those involved in the AI revolution. Throughout 2024, he continually reduced Coatue’s investment in AI powerhouse Nvidia (NASDAQ: NVDA), yet ended the year by investing in another AI stock that has skyrocketed nearly 6,700% since its IPO.
Laffont’s Major Cut in Nvidia Investments
At the start of 2024, Coatue Management held 43,222,010 adjusted shares of Nvidia, considering the company’s significant 10-for-1 stock split in June. By the end of the year, that number had dwindled to just 10,006,488 shares, marking a striking 77% reduction within 12 months or a drop of about 33.2 million shares.
Laffont’s consistent selling of Nvidia could indicate he was simply cashing out. Coatue is known for its dynamic trading style, with its top investments having an average holding period of around 21 months. Given Nvidia’s tenfold stock increase since early 2023, booking profits may have seemed prudent.
However, concerns extend beyond just taking profits. Trade policies from past administrations, especially those of Donald Trump, could affect Nvidia’s operations. Although Nvidia doesn’t import from China, the country is a crucial market. Rising tariffs and tense trade relations pose a risk to Nvidia’s revenue and margins.
Moreover, the Biden administration’s limitations on exporting advanced AI chips to China from 2022 to 2024 may be echoed under Trump’s approach for protective measures over intellectual property. This scenario heightens risks for Nvidia as the company relies on substantial orders from Chinese clients.
Competitive pressure adds another layer of complexity. While Nvidia is recognized for its GPUs, many clients are developing their own AI chips. This trend could lead to reduced demand for Nvidia’s products and affect its pricing power.
Another worrying trend is that groundbreaking technologies often face challenges in their early phases. Historically, major innovations have gone through bubbles that eventually burst. Businesses need time to fully integrate these technologies, and AI is no exception.
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Laffont’s New Investment in a Dynamic AI Stock
In 2024, Laffont added around two dozen new stocks to Coatue Management’s portfolio. Among these, standout is Super Micro Computer (NASDAQ: SMCI)—a provider of customizable rack servers and storage solutions, often referred to as Supermicro.
During the quarter ending in December, Laffont initiated a position in Supermicro with 8,866,735 shares, valued at over $525 million as of February 20 if held steady.
Supermicro attracts attention because of the growing demand for AI infrastructure. Businesses are investing heavily in AI to remain competitive and require robust physical infrastructure capable of supporting rapid decision-making and large AI models. Supermicro’s servers are equipped with Nvidia’s powerful Hopper GPUs, positioning the company as a key player in this space.
The growth potential is notable. After achieving 110% revenue growth in fiscal 2024, analysts expect Supermicro’s net sales for the upcoming fiscal second quarter to reach between $5.6 billion and $5.7 billion, suggesting a year-over-year growth rate of 54%. Leadership hints that full-year revenues could soar from an expected range of $23.5 billion to $25 billion in fiscal 2025 to potential heights of $40 billion in fiscal 2026.
Despite its appeal, Supermicro faces its own controversies, contributing to its stock’s volatility.
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Super Micro Faces Regulatory Scrutiny Amid Internal Probe Findings
Last August, the short-seller firm Hindenburg Research published a report claiming “accounting manipulation” at Super Micro Computer. This serious accusation led to the company’s delay in filing its annual report with the SEC. Additionally, The Wall Street Journal reported that regulators from the Justice Department were investigating the matter. Notably, Super Micro also parted ways with its accounting firm, Ernst & Young.
For Super Micro Computer’s shareholders, there is some good news. An internal investigation, the results of which were made public in early December, found no evidence of fraud or misconduct by management. The company also does not expect to restate its previous quarterly filings with the SEC.
Despite this positive outcome, Super Micro has not yet submitted its annual filing from June 30, nor its financial results from the first quarter of the fiscal year. While the company’s growth appears strong on paper, ongoing uncertainty raises concerns among investors.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
