SUPERNEWS

Equities

Gerstner Cuts Tech Stocks by 20%, Cites AI Gains & Fed Worries

Gerstner trims tech positions amid AI surge, reflecting caution despite bullish outlook on long-term growth.

By Barry Stearns

ᐧ

5/7, 13:48 EDT
Meta Platforms, Inc.
Microsoft Corporation
NVIDIA Corporation
Snowflake Inc.
Uber Technologies, Inc.
article-main-img

Key Takeaway

  • Brad Gerstner of Altimeter Capital reduced tech stock positions by 10-20% after strong AI-driven gains in early 2024.
  • Adjustments reflect concerns over Fed's interest rate policy, potential corporate tax changes, and upcoming election impacts.
  • Despite market recalibration, Gerstner focuses on long-term growth in AI leaders like Snowflake, Meta, Uber, Microsoft, and Nvidia.

Market Adjustments Amid AI Surge

Brad Gerstner, Chair and CEO of Altimeter Capital, has recently adjusted his investment strategy in response to the rapid gains in technology stocks, particularly those benefiting from artificial intelligence (AI) advancements. Gerstner, speaking on CNBC’s “Halftime Report,” mentioned that despite being bullish on AI-driven growth, the significant returns seen in the early months of 2024 warranted a cautious approach. He highlighted a reduction in his own investment exposure by 10 to 20 percentage points through a combination of adding shorts and reducing position sizes across his hedge fund and long-only fund. This decision reflects a broader sentiment of recalibration among investors in light of the year's strong start in tech stocks.

Economic and Regulatory Headwinds

The macroeconomic environment presents challenges that have influenced Gerstner's investment strategy. Notably, the Federal Reserve's stance on interest rates, initially anticipated to include six rate cuts, has shifted towards maintaining current rates to combat persistent inflation. Additionally, the potential expiration of corporate tax rate cuts from 2017 by the end of 2025, unless extended, poses a risk to the growth of the S&P 500. These factors, combined with the upcoming election, contribute to a less favorable backdrop for investors, prompting a more cautious approach to portfolio management.

Focus on Long-Term Growth

Despite the current market adjustments, Gerstner remains committed to investing in companies he believes are positioned for reacceleration, particularly those at the forefront of AI innovation. His top holdings at the end of 2023 included Snowflake, Meta, Uber, Microsoft, and Nvidia, with Meta and Nvidia experiencing significant gains in 2024, up more than 32% and 84%, respectively. Gerstner's strategy emphasizes the importance of investing in companies that are not only benefiting from the current AI boom but also have the potential for sustained growth and innovation.

Street Views

  • Brad Gerstner, Altimeter Capital (Bullish on technology stocks with AI reacceleration):

    "All of these stocks are up a lot just to start this year and the backdrop has gotten a little worse... If you want to take a little bit off the table today, just reflecting on the fact that you’ve achieved a year’s worth of returns in the first few months of the year, I think that that makes sense." "We want to be in the names like Nvidia that are reaccelerating, in the names like Amazon and Google and Microsoft and Snowflake that we believe are reaccelerating. It’s only with that reacceleration ... the numbers are going up for those companies, that the stocks are going to work."