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Third Point Bets Big on AI, Alphabet Drives 17% Gain

Third Point invests nearly 50% in AI, spotlighting Alphabet for its AI advantage and initiating a dividend amidst tech sector growth.

By Max Weldon

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4/30, 19:51 EDT
Amazon.com, Inc.
Broadcom Inc.
Alphabet Inc.
Meta Platforms, Inc.
QUALCOMM Incorporated
Taiwan Semiconductor Manufacturing Company Ltd.
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Key Takeaway

  • Third Point LLC invests nearly 50% of its stock exposure in AI, with a significant focus on Alphabet Inc., driving a 17% stock increase in 2024.
  • Alphabet announces a dividend and $70 billion share repurchase, boosting shares by 10% and highlighting tech sector's shift towards rewarding shareholders.
  • Tech industry's AI investment strategies scrutinized, with Amazon's earnings report seen as pivotal for assessing the balance between growth and shareholder returns.

Alphabet's Strategic AI Investment

Daniel Loeb's Third Point LLC has made a significant move by investing nearly half of its equity portfolio in artificial intelligence (AI)-related companies, spotlighting Alphabet Inc. with a "substantial investment." Loeb, in a letter to investors, emphasized Alphabet's unique position with its "substantial distribution and technology advantage" over competitors, poised to leverage its AI capabilities across its product suite. This investment strategy reflects a broader trend of betting on companies with strong AI-driven growth potential, including other positions in Taiwan Semiconductor Manufacturing Co. and London Stock Exchange Group, identified for their AI-driven catalysts. Alphabet's stock has notably risen by 17% in 2024, following a 58% surge in the previous year, underscoring investor confidence in its AI-driven strategy.

Dividend Announcements and Tech Sector Performance

Alphabet has announced a dividend and a $70 billion share repurchase program, marking a significant shift towards rewarding shareholders amidst its AI-driven growth strategy. This announcement led to a 10% increase in Alphabet shares, contributing to the tech sector's attractiveness, which has seen an over 8% increase this year. The move aligns with a broader trend in the tech industry, where companies like Qualcomm and Broadcom are also offering dividends and showcasing growth potential. This strategy reflects a growing emphasis on balancing shareholder rewards with investment in innovation, particularly in AI.

AI Investments and Market Sentiment

The tech industry's focus on AI investments is under intense scrutiny, with Amazon's upcoming earnings report seen as a critical test for its AI strategy. This comes in the wake of Meta Platforms' earnings miss, which was partly attributed to concerns over its AI investments. Amazon's focus on AWS and generative AI is particularly in the spotlight, with Wall Street keenly observing AWS's market share and AI initiatives as indicators of Amazon's future profitability. The sector's shift towards capital return strategies, highlighted by Alphabet's dividend announcement, has raised expectations around tech companies' potential to balance growth with shareholder returns, including speculation about Amazon's possible dividend announcements or buyback program expansions.

Street Views

  • Daniel Loeb, Third Point LLC (Bullish on Alphabet Inc. and AI-related companies):

    "Alphabet Inc... 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."