Billionaire Philippe Lafont sold CoreWeave and bought this artificial intelligence (AI) stock instead.

Philippe Lafont has built a reputation as one of the world’s best technology investors. His hedge fund, Cotu Management, is known for making big bets on emerging technology trends. And no trend has had a bigger impact on Coatue’s recent portfolio moves than artificial intelligence.

Investors can read Mr. Courtet’s 13-F filing with the Securities and Exchange Commission to learn which companies Mr. Laffont believes stand to benefit most from technology megatrends like artificial intelligence. The disclosure shows hedge funds’ quarterly positions in publicly traded US stocks. Coatue’s latest filing shows it has been sold. coreweave(NASDAQ:CRWV)once the fund’s largest position, favored another great AI stock.

Here’s what investors need to know.

Profit from pre-IPO bets

Although CoreWeave did not debut on the public market until early 2025, Coatue has held a stake in the company since 2024 and led the cloud computing company’s Series C funding round that year. The hedge fund increased its position after the IPO, and combined with the stock’s impressive price performance, it became Cotu’s largest holding at the end of the second quarter.

However, Laffont and his team began chipping away at the position in the third quarter before completely disposing of it in the fourth. The timing couldn’t have been better. The stock price has plummeted since October, dropping by about 50%.

CoreWeave is a very risky investment. The company specializes in AI data centers. thanks to the close relationship with NvidiaAs a major shareholder, it has access to the high-demand, high-performance graphics processing units (GPUs) that companies need for AI training and inference. The company has long-term agreements with developers to use those GPUs even before increasing capacity. Those contracts are then used as collateral to fund the construction of the data center. In other words, leverage is high compared to earnings.

While this allows for rapid growth, it also means that one wrong move can have a huge impact on your bottom line. Investors saw it coming last fall when the company reported delays in data center construction by one of its contractors, which led to a collapse in its stock price. But the demand for computing remains insatiable, and CoreWeave’s largest customers are sticking with it. So it’s only a matter of time before they make up for lost revenue from not being able to meet demand.

The company’s accrued revenue has jumped from $15.1 billion at the end of 2024 to $66.8 billion at the end of 2025, with the increased portion of that revenue slated to take place over the next 48 months. We expect revenue to more than double in 2026, and capital expenditures (Capex) are increasing just as fast. As a result, cash flow remains negative and the company relies on debt for continued growth. Still, the company expects operating margins to eventually expand to 25% to 30% over the long term.

The current stock price is just over 6 times sales, so it might be worth taking a small position in a company with tremendous growth potential. But investors may be better off pursuing other less risky opportunities. That seems to be Lafont’s strategy.

AI stock that Lafont bought on his behalf

Laffont made a number of new purchases in the fourth quarter, but one of the biggest was nearly doubling its stake in Coatue. applied materials(NASDAQ:AMAT). Applied Materials is the world’s largest wafer fabrication equipment provider. Its broad portfolio serves nearly every chip manufacturer, spanning both logic and memory chip designers.

Both areas are currently seeing incredible demand. The biggest logic chip makers are spending millions to build production capacity to meet demand for AI accelerator chips like Nvidia’s GPUs. taiwan semiconductor manufacturingFor example, this year’s capital expenditure budget has been announced at $52 billion to $56 billion, an increase from last year’s $41 billion. Meanwhile, the demand for high-bandwidth memory is finally forcing memory chip manufacturers to expand capacity. micron announced that it expects capital spending to exceed $25 billion in 2026, and management said it expects capital spending to increase in 2027.

Applied Materials is well-positioned to take full advantage of that increased spending. Its equipment is best in class and should remain that way. Applied’s size gives it a significant advantage over competing manufacturers by allowing it to invest more in research and development and work closely with customers to meet their needs. As a result, Applied is in a position to expand its market share and increase its profit margins.

Applied Materials management expects the company’s equipment business to grow more than 20% this year and continue that momentum into 2027. This outlook is based on longer ramp-up times as customers build out physical capacity (cleanrooms) in preparation for equipment delivery. As such, investors can expect significant earnings acceleration over the next two years.

The stock trades at just 30 times forward earnings, making it look cheap compared to its growth prospects. A 20% increase in revenue could lead to further revenue growth as Applied Materials’ margins improve. In fact, analysts expect earnings per share to grow 25% in 2027. No wonder Mr. Lafont decided to add a position.

Adam Levy works at Applied Materials and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Applied Materials, Micron Technology, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.