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Equities

Loeb's Third Point Bets Big on Alphabet, AI Dominates Portfolio

Dan Loeb invests heavily in Alphabet due to AI, with tech sector dividends rising and Amazon's AI strategy in focus.

By Alex P. Chase

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4/30, 15:53 EDT
Amazon.com, Inc.
Broadcom Inc.
Alphabet Inc.
Meta Platforms, Inc.
QUALCOMM Incorporated
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Key Takeaway

  • Dan Loeb's Third Point invests heavily in Alphabet, attributing nearly half of his portfolio to AI, with Alphabet's stock rising 17% in 2024.
  • Alphabet announces a dividend and a $70 billion share repurchase, boosting shares by 10%; tech sector remains attractive with an over 8% increase this year.
  • Amazon's earnings report is anticipated as a test for its AI strategy amidst tech sector's focus on rewarding shareholders and growth potential.

Alphabet's AI-Driven Growth

Dan Loeb of Third Point has significantly invested in Alphabet, citing artificial intelligence (AI) as a key driver of growth. Loeb, whose portfolio is nearly half dedicated to AI themes, sees Alphabet's technology and distribution advantages as pivotal for leveraging AI across its product suite. Alphabet's stock has seen a notable increase, with a 17% rise in 2024 following a 58% surge the previous year. This growth is attributed to Alphabet's AI capabilities enhancing and monetizing its products more effectively. Loeb's re-investment in Alphabet, after a brief exit, underscores his confidence in the company's AI-driven future.

Dividend Announcements and Tech Sector Performance

Alphabet has joined the ranks of dividend-paying tech giants, with a recent announcement of a 20 cents per share dividend and a $70 billion share repurchase program. This move, coupled with a first-quarter earnings beat, propelled Alphabet shares 10% higher. The tech sector, despite recent valuation concerns, remains a focus for investors, with the S&P 500 information technology sector up over 8% for the year. Analysts highlight several tech stocks, including Qualcomm and Broadcom, offering dividends and growth potential, indicating a broader trend of tech companies rewarding shareholders while pursuing growth.

AI Investments and Market Sentiment

The tech industry's investment in AI is under close scrutiny, with Amazon's upcoming earnings report seen as a litmus test for its AI strategy. Following Meta Platforms' earnings miss attributed to AI investment concerns, Amazon's focus on AWS and generative AI will be pivotal. Wall Street is particularly interested in Amazon's cloud and AI strategy, with AWS's market share and AI initiatives critical for the company's profitability. The tech sector's capital return strategies, highlighted by Alphabet's dividend announcement, have also shifted investor attention towards Amazon, raising speculation about potential dividend announcements or buyback program expansions.

Street Views

  • Dan Loeb, Third Point (Bullish on Alphabet and AI-related investments):

    "We shared our views on AI’s transformational potential in recent letters and it is a key element of the thesis for nearly half of our equity positions today... Alphabet 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."