Betting on AI! Hedge fund titan Dan Loeb favors these two stocks and continues to hold TSMC and Nvidia
Daniel Loeb, founder of hedge fund Third Point, is doubling down on the AI sector, expanding his portfolio to international semiconductor companies he believes are undervalued.
On November 3, Third Point revealed in its latest Q3 investor letter that it has taken positions in SK Hynix, a Korean memory chip manufacturer, and Ebara, a Japanese semiconductor equipment producer.
Loeb stated in the letter that both companies are leaders in their industries and major beneficiaries of AI infrastructure construction, with "absolutely reasonable" valuations that are "significantly discounted" compared to their U.S. peers.
Although Loeb admitted that some areas of his fund's recent performance had not met expectations, he expressed overall optimism about market prospects. He believes that sustained AI investment, along with a possible rate-cutting cycle by the Federal Reserve, indicates a favorable market environment may persist.
Computing Power Remains King; Continued Optimism for NVIDIA
Despite expanding into new investment territories, Loeb remains firmly convinced of the core assets of AI computing power. He emphasized:
We still live in a world constrained by computing power.
He pointed out that this theme has benefited the fund's existing investments in TSMC and NVIDIA, both indispensable companies in AI infrastructure construction.
Loeb's team has conducted in-depth research into the development of AI technology. He refuted previous concerns that breakthroughs in training efficiency by models like DeepSeek signal the peak of AI computing demand. He wrote:
Reality has proven quite different. New AI features and architectures, especially inference-based models, are several orders of magnitude more computing-intensive than previous generations.
Loeb believes this not only offsets efficiency gains but actually accelerates AI computing demand.
Loeb concluded that AI computing has evolved from a single pre-training expansion rule to three dimensions: pre-training, post-training, and inference.
Staying Alert to Risks; Close Attention to AI Infrastructure Investment and Credit Markets
While optimistic about AI prospects, Loeb remains cautious about potential risks.
He said in the letter that his team is "closely monitoring any risks in the ecosystem that may signal a potential pullback." He warned:
One area we are closely watching is AI infrastructure, especially the unprecedented scale of investment in power and data centers.
He noted that the scale of capital investment is multiple times that of the entire high-yield debt and leveraged loan markets. While he acknowledged “the impact (and opportunity) will be enormous,” he also reminded that “demand and supply are very unlikely to grow steadily in sync.”
Furthermore, the fund is actively seeking and seizing multiple opportunities in credit markets.
Loeb mentioned that corporate credit investments delivered a return of 4.0% in Q3 (net return 3.7%), and a year-to-date gain of 7.2% (net return 5.4%).
Additionally, specific events this year have created several opportunities for distressed asset trades, such as subprime auto loan originator Tricolor and subprime auto parts manufacturer First Brands.
The former had its bonds sold off due to credit issues, and the fund is evaluating its capital structure and has made a small investment. The latter saw a collapse in senior loan prices following bankruptcy; the fund, in collaboration with its team, analyzed the impact and profited from price fluctuations in the collateralized loan obligation (CLO) tranches.
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