Philippe Laffont was known for successfully investing in technology stocks before he founded Coatue Management, a technology-focused hedge fund, in 1999. Since then, he has grown the fund’s size to more $35 billion in assets under management.

Laffont has his finger on the pulse of the artificial intelligence (AI) revolution. His contrarian investment in Super Micro Computer, a company that manufactures high-end servers for data centers, turned some heads earlier this year.

Coatue bought into Supermicro at a controversial moment, but it seems Laffont had a change of heart. At the end of June, there were zero shares of the custom server builder in its portfolio.

While Coatue was disposing of Supermicro with its left hand, it was buying up shares of Intuitive Surgical (ISRG -1.34%) with its right. The hedge fund snapped up 39,512 shares of the robot-assisted surgery pioneer in the second quarter.

Intuitive Surgical stock has tumbled this year, but Laffont has reasons to expect a rebound. Here’s a look at what they are to see whether this stock could be a good fit for your portfolio.

An unbeatable advantage

When the market closed on Sept. 12, 2025, shares of Intuitive Surgical were up 19,390% since its initial public offering (IPO) 25 years ago. A few years before its IPO, the Food and Drug Administration made the company’s da Vinci robotic surgical system the first one with clearance to assist with minimally invasive abdominal surgeries.

Medtronic, Johnson & Johnson, and Stryker market surgical robots, but they entered the market after Intuitive Surgical. The pioneer is still the largest member of its industry. At the end of 2024, there were 11,040 Intuitive Surgical systems installed in hospitals worldwide.

Intuitive’s massive installed base of machines isn’t sitting idle either. Surgical teams trained to use da Vinci systems performed 2.7 million procedures last year. Plus, Ion, its more recently launched lung tumor biopsy machine, performed 95,000 procedures last year.

To date, competing systems generally address procedures that don’t already employ da Vinci systems, such as knee replacements and spinal surgeries. Hospital systems can spend more than $1 million installing a da Vinci system and then an even larger sum supporting and training the professionals who will use it. That’s a huge advantage over newer surgical systems that competitors probably won’t be able to overcome.

Placing systems and training surgeons to use them generates revenue for Intuitive, but these aren’t the main sources. Around 84% of total revenue last year came from recurring sources such as instruments and accessories that must be replaced before each procedure.

Why Intuitive Surgical stock is down

Intuitive Surgical has been a terrific stock for its long-term shareholders, but it’s been a stinker this year. It’s down about 26% from a peak it set in February.

Fear that tariffs will pressure profit margins has been a weight on Intuitive Surgical’s stock price. When reporting second-quarter results in July, management reduced its adjusted gross profit margin expectation to a range between 66% and 67%. That would be a minor decline from the 69.1% gross margin reported last year, but this temporary setback is hardly a reason to avoid the stock.

Earlier this year, Medtronic submitted an application to the Food and Drug Administration to perform urology procedures with its Hugo RAS system. Roughly one-fifth of all procedures performed with da Vinci machines last year were in the urology category.

Investors concerned that the Hugo system will pull market share from da Vinci should know that its launch overseas hasn’t been very successful. It’s been authorized for sale in the European Union since 2021, but Medtronic still doesn’t tell investors how much revenue Hugo’s generating in its quarterly reports.

Time to buy?

In the U.S., hospitals considering a new surgical system for urologic surgeries could have a new option from Medtronic by the end of the year. Luckily for Intuitive Surgical, the da Vinci 5 system, which launched in March 2024, already makes Medtronic’s Hugo system seem outdated.

Despite tariff pressure, investors can expect significant growth from Intuitive Surgical. Management is forecasting overall procedure growth of 15.5% to 17.0% this year. High switching costs for hospitals could lead to procedure growth that continues rising for another decade or two.

With a stock price that’s been trading at 55.3 times forward earnings expectations, investors are already expecting profit growth at a double-digit percentage for years to come. Intuitive Surgical stock could fall hard if Medtronic or another competitor begins pressuring sales growth in the years ahead.

Given Hugo’s performance in the E.U., threats from well-heeled competitors appear toothless. Adding some shares to a diverse portfolio now could be the right move for investors with a high risk tolerance.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuitive Surgical. The Motley Fool recommends Johnson & Johnson and Medtronic and recommends the following options: long January 2026 $75 calls on Medtronic and short January 2026 $85 calls on Medtronic. The Motley Fool has a disclosure policy.

Investors may not realize it, but today (Aug. 14) is one of the most important days of the entire quarter. While earnings season is critical in helping investors learn about the operating health of America’s leading businesses, Form 13F filings, which are due today, are equally invaluable.

A 13F is a required filing due no later than 45 calendar days following the end to a quarter for institutional investors with at least $100 million in assets under management. It allows investors to track which stocks Wall Street’s smartest money managers purchased and sold in the latest quarter (in this instance, the June-ended quarter), as well as identify which trends have the attention of successful fund managers.

Although Warren Buffett is the stock market’s most followed billionaire investor, he’s far from the only billionaire known for their outsized investment returns. For instance, Coatue Management’s Philippe Laffont, who’s been a big investor of the artificial intelligence (AI) revolution, is known for spotting phenomenal deals hiding in plain sight.

Laffont’s approach to the evolution of AI has been particularly interesting. Specifically, he’s pared down his fund’s stake in the face of the AI movement, Nvidia (NVDA -0.83%), for eight straight quarters, and has been buying shares of another historically cheap AI stock hand over fist.

Coatue Management’s billionaire chief has sold 83% of his fund’s Nvidia stake

While some billionaire money managers bid adieu to AI-graphics processing unit (GPU) colossus Nvidia many quarters ago, Coatue Management billionaire boss has been paring down his fund’s stake with some degree of consistency for two full years. Accounting for Nvidia’s historic 10-for-1 stock split in June 2024, Laffont has overseen an 83% reduction in his fund’s position in this AI powerhouse:

• Q1 2023: 49,802,020 shares of Nvidia
• Q2 2023: 46,449,700 shares
• Q3 2023: 45,410,400 shares
• Q4 2023: 43,222,010 shares
• Q1 2024: 13,851,410 shares
• Q2 2024: 13,754,447 shares
• Q3 2024: 10,138,161 shares
• Q4 2024: 10,006,488 shares
• Q1 2025: 8,545,835 shares

With Coatue’s average top-20 position held for roughly 21 months, as of the end of March, it demonstrates that Laffont and his top advisors aren’t shy about locking in gains when presented with the opportunity. Nvidia shares catapulting more than twelvefold since the start of 2023 has given Coatue’s brightest investor plenty of reason to cash in his chips.

The concern with Philippe Laffont’s persistent selling spanning eight quarters is there may be more than profit-taking on his mind.

For instance, while the addressable opportunity for AI is sky-high, historical precedent shows that every next-big-thing trend for three decades has endured a bubble-bursting event early in its expansion. Investors have a tendency to overhype the utility and early stage adoption rates of new technologies, which eventually leads to these lofty expectations not being met. No company has been a more direct beneficiary of the evolution of AI than Nvidia, which suggests it would potentially be the hardest hit if the AI bubble were to burst.

Another possible consideration for Philippe Laffont is growing competition in the AI-GPU space. Make no mistake about it, Nvidia’s Hopper (H100) and Blackwell GPUs are at the top of the pedestal, in terms of compute ability. But this doesn’t mean Hopper and Blackwell won’t endure headwinds in the coming quarters and years.

Specifically, internal competition could prove to be a thorn in Nvidia’s side. Many of its leading customers by net sales are developing AI-GPUs and solutions for their data centers. Even though these chips are slower than Nvidia’s and they pose no external competitive threat, they’re considerably cheaper, more readily accessible, and capable of taking up valuable data-center real estate. In short, these chips could crush Nvidia’s pristine pricing power and gross margin.

Nvidia’s valuation is worrisome, as well. Historically, megacap companies have peaked with price-to-sales (P/S) ratios of roughly 30 to 40. Nvidia is tipping the scales at a P/S ratio of more than 30, as of the closing bell on Aug. 11.

Billionaire Philippe Laffont can’t stop buying this cash-rich AI stock

On the other end of the spectrum is a historically cheap and cash-rich artificial intelligence stock that Coatue Management’s billionaire chief can’t stop buying. I’m talking about China-based Alibaba Group (BABA 3.73%).

When 2024 came to a close, Alibaba was a relatively forgettable holding in Coatue’s portfolio, with just 192,728 shares held. But during the first quarter, Laffont came close to 20Xing this stake to 3,801,703 shares, based on the filed 13F.

While Alibaba’s growth ambitions very much rely on AI, this isn’t the company’s foundational operating segment responsible for most of its cash flow. Alibaba laid its roots through its e-commerce operations in China.

Whereas online retail sales have matured in the U.S., a burgeoning middle class in the world’s No. 2 economy by gross domestic product can generate high-octane e-commerce sales growth for the foreseeable future. Based on an analysis from DBS Treasures, Taobao and Tmall combine to account for a 41% share of China’s e-commerce space. These platforms should have little issue continuing to generate bountiful cash flow that Alibaba can redirect to faster-growing and/or higher-margin initiatives.

However, e-commerce isn’t the only arena that Alibaba Group is leading. According to estimates from tech analysis firm Canalys, Alibaba Cloud reined in 33% of Mainland China’s cloud infrastructure service spending during the first quarter, which was nearly double the 18% share Huawei Cloud earned as the No. 2 cloud infrastructure services provider.

Alibaba is aggressively incorporating generative AI solutions into its cloud platform and giving its clients access to the tools needed to build and train large language models. The expectation is that these AI solutions will enhance demand (and margins) for Alibaba Cloud.

Something else that’s likely attracted Laffont to Alibaba is the company’s capital-return program. It closed out fiscal 2025 (ended March 31) with $51.6 billion in cash, cash equivalents, and short-term investments, along with $7.4 billion in equity securities and $6 billion in restricted cash. When combined with the cash flow being generated from Alibaba’s numerous operating segments, there’s more than enough capital available for share repurchases and dividends.

The proverbial cherry on the sundae is that Alibaba Group stock is historically inexpensive at an estimated 11 times forward-year earnings. This is modestly lower than its average forward price-to-earnings (P/E) ratio over the past half-decade, and it stands out amid a historically pricey stock market.