Investing Insights: AI Stocks’ Performance Under Scrutiny

Investors are closely watching AI stocks and major institutional investors' 13F filings. Philippe Laffont's selling of Nvidia and heavy investment in CoreWeave highlights distinctive trends in market behavior influenced by earnings pressures and competition.

Date: 22-05-2025

AI Rating: 5

**Earnings and Market Dynamics**

The report details significant trading behavior by institutional investors, particularly by Philippe Laffont of Coatue Management, who has been a noted seller of Nvidia stocks, decreasing his holdings by 83% over two years. This selling trend raises a critical point for investors: the perception of Nvidia’s future performance is changing. Investors should be cautious as major movements from experienced funds can signal underlying issues in company performance or industry outlook.

Nvidia's revenue from its data center segment, where it has a near-monopoly status, has been underlined by impressive gross margins exceeding 70%. However, the report notes competitive pressures impacting its margins, potentially due to the emergence of new competitors and internal developments by Nvidia's clients in chip production. As margins decline, further scrutiny will be necessary to gauge future earnings.

**Profit Margins Under Threat**

While Nvidia's gross margins currently appear robust, the anticipated decline in this metric raises concerns about profitability in a competitive landscape. Margins surpassing 70% are indicative of substantial pricing power, yet should competition further erode this advantage, gross margins could dip significantly, adversely affecting net income and consequently, earnings per share (EPS) moving forward. This concern is accentuated by observations that competitive pressures might be adversely affecting Nvidia's market positioning.

**CoreWeave's Early Challenges**

In contrast, CoreWeave, an AI infrastructure company backed by Nvidia, has shown promising revenue growth projections. However, the report also highlights that CoreWeave is incurring steep net losses coupled with hefty net interest expenses. This troubling trend underscores risks associated with high growth companies heavily reliant on debt financing, adding pressure on their financial health.

The apprehension surrounding both Nvidia and CoreWeave, along with the overall implications of potential AI market volatility, warrants careful monitoring from an investment standpoint. Potential investors should weigh closely whether the high growth forecasts of CoreWeave will indeed translate into sustainable profit margins and net income in the long run.

Stocks: NVDA CRWV