Loeb’s Third Point Says AI Makes Up Almost 50% of Stock Exposure

Yiqin Shen, Bloomberg News

A logo which reads "AI" at the Microsoft Corp. booth at the Hannover Messe 2024 trade fair in Hannover, Germany, on Monday, April 22, 2024. German Chancellor Olaf Scholz is optimistic on his country's economic prospects, citing record employment and slowing inflation thanks to falling energy costs. Photographer: Krisztian Bocsi/Bloomberg , Bloomberg

(Bloomberg) -- Third Point LLC has nearly half of its equity portfolio in artificial intelligence-related companies, including Alphabet Inc., which it made a “substantial investment” in during the first quarter.

The Mountain View, California-based company “has both a substantial distribution and technology advantage over competitors and is positioned to use its AI capabilities to unify, enhance, and better monetize the entire suite of its products,” Daniel Loeb, the firm’s billionaire founder and chief executive officer, said in a letter to investors dated April 30.

Third Point also added positions in Taiwan Semiconductor Manufacturing Co. and London Stock Exchange Group for “AI-driven” catalysts in the three months through March, according to the letter.

The firm’s flagship fund gained 7.8% in the period, compared with a nearly 11% return in the S&P 500 Total Return Index. While it trailed the broader stock market, the firm said the fund delivered “solid results” thanks to a strong performance of megacap tech holdings like Meta Platforms Inc. and Amazon.com Inc.

“Unlike in past periods of technological paradigm shifts, this new technology favors incumbents who are deploying their financial and intellectual war chests to win the AI arms race,” Loeb wrote in the letter.

Third Point was not the only hedge fund that underperformed the broader stock market at the start of the year. David Einhorn’s Greenlight Capital returned 4.9% in the first quarter, net of fees and expense, also trailing the S&P 500.

Read more: Einhorn’s Greenlight Trailed ‘Broken’ Market Last Quarter (1)