Billionaire Philippe Laffont trimmed 8 of his fund's top 10 positions last quarter, adding only to Taiwan Semiconductor and Lam Research.

Coatue Management, Laffont's hedge fund overseeing a $33 billion public equity portfolio, sold shares in eight of its 10 largest holdings while adding to only two: Taiwan Semiconductor Manufacturing (TSMC) and Lam Research. Both companies are positioned earlier in the AI computing supply chain—TSMC is the largest contract semiconductor manufacturer in the world, and Lam Research is a leading supplier of wafer fabrication equipment.

The shift reflects Laffont's view that hyperscalers' massive capital expenditure on AI infrastructure is transferring cash flow away from cloud computing companies toward manufacturers. Microsoft alone expects capital expenditures to climb to $190 billion for the calendar year. Equipment suppliers and manufacturers like TSMC and Lam Research have been able to raise pricing as demand soars and generate substantial free cash flow.

TSMC remains Laffont's top position despite valuation gains, trading at a forward price-to-earnings ratio of 25—in line with Microsoft and Nvidia despite a much more positive medium-term business outlook. Lam Research shares are up nearly 60% so far this year, with its forward P/E climbing from around 30 at the start of the year to 48 today.