- Dan Loeb heralds AI as a game-changing technology in his second-quarter letter to investors.
- The Third Point chief ranks it among transformative tools like the PC, internet, mobile, and cloud.
Dan Loeb hailed artificial intelligence as a decade-defining technology, and predicted a mild recession, in his second-quarter letter to investors this week.
"We believe generative and other forms of AI could compare to the Industrial Revolution but compressed into a period of months and years rather than decades," the billionaire investor and Third Point chief said.
Loeb declared a "profound economic upheaval" is underway. He compared the rise of AI to the advent of the personal computer in the 1980s, Internet in the 1990s, mobile devices in the 2000s, and cloud computing in the 2010s.
The emerging tech will supercharge productivity, expand profit margins, enhance people's wellbeing, and counter inflationary pressures, he said. Investors have to grasp its implications to pick winning stocks, he added.
Loeb singled out the big three cloud providers as likely beneficiaries, noting that many AI companies will rely heavily on their services.
"Microsoft, Amazon, and Google are the 'picks and shovels' of the AI gold rush and should benefit regardless of which products ultimately 'strike gold' at the application software layer of the IT stack," he said.
Loeb singled out Microsoft in particular, pointing to its stake in ChatGPT-owner OpenAI, its plans to add AI features to its Office applications, and its ability to offer related services to businesses.
Separately, Loeb issued a bright outlook for the US economy. Declining inflation will allow the Federal Reserve to focus on stimulating growth, in time to offset a drop in consumer spending as households exhaust their pandemic savings, he predicted.
Moreover, he underscored the strong state of consumer and corporate finances across much of the economy, arguing it should prevent a wave of debt defaults and credit-market turmoil. The upshot is a mild recession appears more likely than a severe one, he said.
Third Point's flagship Offshore Fund only returned 1.1% in the second quarter, and was down 3% for the year as of July 31. Its gains on Microsoft, Alphabet, Amazon, and AMD were offset by losses on hedges, short bets, and other long positions.