Billionaire Dan Loeb Has 23% of His Portfolio Invested in 3 AI Stocks (Hint: Not Nvidia)
Dan Loeb, the founder and CEO of Third Point, has made a name for himself as one of the most successful hedge fund managers of his generation. Despite Third Point underperforming in 2022 and 2023, the long-term outperformance of Loeb’s flagship Offshore Fund makes him a compelling case study for investors.
One of the key themes in Loeb’s investments is artificial intelligence (AI), which he compares to disruptive technologies like the internet and smartphones. While it may come as a surprise that Third Point does not have a position in Nvidia, Loeb has allocated 23.1% of his $8.7 billion portfolio to three AI stocks as of June:
– Amazon (NASDAQ: AMZN): 11%
– Microsoft (NASDAQ: MSFT): 8.1%
– Taiwan Semiconductor (NYSE: TSM): 4%
Here’s a closer look at each of these companies:
Amazon: 11% of Dan Loeb’s Portfolio
Amazon, the largest e-commerce marketplace in North America and Western Europe, has been leveraging its retail business to establish a strong presence in digital advertising. However, the real opportunity for AI revenue lies in Amazon Web Services (AWS), the leader in cloud infrastructure and platform services. With new AI products like Amazon Q and Amazon Bedrock, AWS is well-positioned to benefit from the growing demand for AI services.
Looking ahead, Wall Street expects Amazon’s earnings to grow at a rate of 25% annually through 2025. Given the current valuation, patient investors may find Amazon to be a reasonable entry point for their portfolio.
Microsoft: 8.4% of Dan Loeb’s Portfolio
Microsoft is another major player in the AI space, with initiatives across its software and cloud businesses. Azure, Microsoft’s cloud platform, is gaining market share due to its strength in cybersecurity, analytics, and AI. Collaboration with OpenAI has further enhanced Azure’s appeal to developers looking to build generative AI applications.
While Wall Street forecasts a 13% annual earnings growth for Microsoft through fiscal 2026, the current valuation may seem expensive. Despite its compelling growth prospects, investors may want to exercise caution at the stock’s current price.
Taiwan Semiconductor: 4% of Dan Loeb’s Portfolio
As the leading semiconductor foundry by revenue, Taiwan Semiconductor Manufacturing Company (TSMC) holds a significant advantage in the industry. Its process technology leadership allows TSMC to consistently improve chip performance, cost, and time to market, attracting high-profile customers like Apple, AMD, Nvidia, Qualcomm, and Broadcom.
With the demand for AI chips on the rise, TSMC stands to benefit from the growing revenues in this segment. Wall Street projects a 29% annual earnings growth for TSMC through 2025, making the current valuation appear reasonable for potential investors.
In conclusion, Dan Loeb’s strategic allocation to AI stocks reflects his confidence in the growth potential of these companies. While each of the mentioned stocks presents unique opportunities, investors should carefully assess their own risk tolerance and investment goals before making a decision.
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Disclaimer: This article was originally published by The Motley Fool. John Mackey, Suzanne Frey, and Randi Zuckerberg have affiliations with some companies mentioned. The Motley Fool has a disclosure policy.