AI Supercycle. Hi everyone. A smart way to achieve better investment results is to learn from the best money managers. And one of the most successful technology investors over the last two decades has been Coatue founder Philippe Laffont.
Laffont right now is all in on artificial intelligence. He recently shared a view that echoes what I’ve written here before: the market may still be underappreciating the opportunity in AI.
Laffont, a former management consultant, started his investment career as an analyst at Tiger Management in 1996 and founded Coatue in 1999. The firm looks to identify important secular innovations early and invest in the winners. Coatue now manages about $55 billion in assets, according to a firm spokeswoman.
Since its inception in 2015, the firm’s annual East Meets West conference has become one of the most anticipated technology events of the year, where entrepreneurs network and share industry insights. This year’s 100 attendees included the chief executives from Netflix, Amazon, Intel, and
GE Vernova, along with senior executives from major AI start-ups like OpenAI.
Last week, the firm published Laffont’s keynote speech video from the conference.
Here are six highlights from the presentation:
AI Is Still in Early Stages. Laffont said we are still at the beginning of an AI supercycle, which is just three years old. There’s a major technology trend every 10 years or so, he noted, from PCs to mobile internet to cloud and now AI. “Fundamentally, as a tech investor, you look for these big waves,” Laffont said. “We’re pretty excited about AI.”
He predicts AI will enable massive winners this decade, similar to how Dell's stock went up more than 1000 times in the 1990s. Laffont says AI should also drive wealth creation, with the technology sector likely growing to 75% of U.S. market cap from under 50% today.
Constant Disruption. Coatue looked at the history of what happens to the top 25 technology companies by value and found a quarter to one-third turnover every five years. The market “is absolutely relentless in getting rid of the deadweight and letting the best companies rise to the top,” Laffont said.
Tech Wins but Beware of Volatility. It pays to be long innovation. Laffont noted that the Nasdaq 100 has easily outperformed the Dow Jones Industrial Average over the last four decades with a 15% annual return versus 12%, respectively. But tech investors have to hold through larger drawdowns.
Nvidia shareholders have had to experience 50% declines seven times since its IPO, he points out, and the Nasdaq fell 78% during the dot-com selloff.
Watch Big Tech Capex. It is important to focus on how the large technology companies keep raising their AI infrastructure budgets to build out data centers and buy chips to train and serve AI models.
Laffont’s data show that Wall Street’s 2025 consensus forecast for Big Tech capex has risen from $152 billion in 2021 to $213 billion in January 2024 to $310 billion in January 2025, to $365 billion today. It’s a bullish signal for AI’s traction and portends the real benefits of the technology.
Coatue’s research also shows a dramatic surge in usage of AI chatbots from both enterprises and from consumers over the last few months.
New Hyperscalers. Laffont believes AI will open up opportunities for new cloud computing players that specialize in AI. He believes the allocation of GPUs from Nvidia is a big deal and will be an indicator for future cloud revenue.
For 2025, Nvidia will sell 11% of its GPUs for the cloud computing market to CoreWeave and another 19% of its GPUs for the market to Oracle, according to Coatue’s analysis.
Don’t Bet Against America. Laffont said the U.S. has two unassailable advantages: Wall Street and Silicon Valley. American technology companies account for 75% of the sector’s global market cap, while 60% of the world’s AI researchers live in the U.S. There is no other country that has a comparable concentration of engineering talent and world-class universities.
He expects AI to drive a virtuous productivity cycle, leading to lower labor costs, less inflation, higher GDP growth, and lower budget deficits. The U.S. has brighter days ahead, according to Laffont.
Write to me at tae.kim@barrons.com or follow me on X at @firstadopter.
