Hedge fund manager Philippe Laffont reduced his exposure to Nvidia and started a position in CoreWeave, one of Wall Street’s hottest IPO stocks.
Nvidia (NVDA 1.74%) is the cornerstone of the artificial intelligence (AI) boom, and Wall Street has a great deal of conviction in the semiconductor company. Among 65 analysts, the median target price is $175 per share. That implies 13% upside from its current share price of $155.
Yet hedge fund manager Philippe Laffont of Coatue Management sold 1.4 million shares of Nvidia in the first quarter, reducing his stake by 15%. Meanwhile, the billionaire purchased 14.4 million shares of CoreWeave (CRWV 1.22%), an AI stock that has returned 300% since its IPO on March 28.
Here’s what investors should know about Nvidia and CoreWeave.
Image source: Getty Images.
Nvidia: The stock Philippe Laffont was selling in the first quarter
Nvidia reported strong first-quarter financial results that beat expectations on the top and bottom lines. Sales rose 69% to $44 billion due to what CEO Jensen Huang called “incredibly strong” demand for AI infrastructure solutions. Meanwhile, non-GAAP (generally accepted accounting principles) earnings increased 33% to $0.81 per diluted share, and would have grown more quickly had it not been for export restrictions.
Looking ahead, investors have good reason to think Nvidia can maintain its momentum for several years to come. The company is not only the market leader in data center graphics processing units (GPUs), chips used to accelerate artificial intelligence (AI) applications, but it also has booming networking and cloud services businesses built on growing demand for AI.
That sets Nvidia up for strong sales growth through the end of the decade. Grand View Research estimates spending on AI hardware, software, and services will increase at 35% annually through 2030. Meanwhile, Wall Street expects Nvidia’s adjusted earnings to grow at 40% annually through the fiscal year ending in January 2027. That makes the current valuation of 49 times adjusted earnings look fair.
So, why did Philippe Laffont sell Nvidia? I think profit-taking factored into the decision. When he first bought the stock in Q3 2016, the average split-adjusted price was $1.47 per share. But the average price had risen 8,500% by Q1 2025.
Regardless, it would be wrong to assume Laffont has lost confidence. Nvidia was still his eighth-largest holding at 4% of his portfolio as of March 31.
I think Laffont has the right idea. Anyone sitting on monster gains can take some profits and reinvest that money elsewhere. At the same time, it makes sense to keep a modest position in Nvidia because the company has a strong presence in so many parts of the AI economy. Indeed, Angelo Zino at CFRA Research thinks Nvidia “will be the most important company to our civilization over the next decade.”
CoreWeave: The stock Philippe Laffont was buying in the first quarter
CoreWeave provides infrastructure and software services purpose-built for AI workloads. The company is quite adept at managing GPU clusters. An internal study shows up to 20% better performance compared to other public clouds, and independent research company SemiAnalysis recently ranked it as the best AI cloud platform on the market.
CoreWeave reported tremendous first-quarter financial results. Revenue climbed 420% to $981 million, and adjusted operating income (which eliminates stock-based compensation and interest payments) increased 550% to $162 million. However, the company reported a non-GAAP net loss of $150 million because interest payments cut deeply into profits.
Building and maintaining data center infrastructure is costly, especially when the servers are built for AI. But CoreWeave has a responsible borrowing strategy: It only takes on debt when contracts create a need for additional capacity, and only if those contracts more than cover the cost of the debt. Management calls it “naturally deleveraging self-amortizing debt.”
CoreWeave is well positioned to benefit as demand for AI infrastructure increases. The company said its revenue backlog increased 63% to $26 billion in the first quarter due in large part to a new deal with OpenAI. But its clientele also includes noteworthy technology companies likely to spend more on AI infrastructure in the years ahead, such as IBM, Meta Platforms, Microsoft, and Nvidia.
Importantly, Philippe Laffont bought CoreWeave for about $40 per share because the company held its IPO on March 28, meaning it was only public for two trading days in the first quarter. Its share price ranged from $37 to $40 during that period. CoreWeave has since quadrupled in value, and the stock now trades at 29 times sales, a very expensive valuation.
For context, only three companies in the S&P 500 (^GSPC 0.52%) currently have price-to-sales ratios above 29. So, investors should be cautious. I think it’s OK to buy a small position today, but I would wait for the stock to get cheaper before building a large position.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends International Business Machines, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
