It is an inescapable fact. The storm of artificial intelligence (AI) is just beginning, and the ones leading this changing paradigm are none other than Nvidia (NASDAQ: NVDA)The company has become virtually unforgettable as a key player in the AI revolution thanks to its gold standard. Graphics Processing Unit (GPU)It provides the computational power that forms the basis of AI.
If you doubt it, consider these facts: In the company’s fiscal first quarter of 2025 (ended April 28), revenue soared 262% year over year to $26 billion, while diluted earnings per share (EPS) soared 629% to $5.98.
But as the AI revolution gains momentum, some investors are questioning Nvidia’s sustainability, fearing competition and high valuations. As a result, some investors have already moved away from the chipmaker in search of the “next big thing” in AI. A look at the holdings of a highly successful hedge fund manager may provide some food for thought.
Billionaire Daniel Loeb is one such asset manager, making his name as CEO of Third Point, which he founded in 1995. With humble beginnings and just $3.4 million in initial capital, Loeb turned his startup capital into nearly $7.8 billion in assets under management.
He has been very clear about his views on the potential of AI. He believes it will be “transformational” and a catalyst for “profound economic upheaval.” Loeb believes so strongly in AI that it is a “key element” in the thesis of nearly half of the fund’s holdings.
His three largest AI assets to date are:
AI Stock #1: Amazon — 11.8% Stake
Third Point has invested heavily. Amazon (NASDAQ: AMZN)He has held stakes in the e-commerce and cloud giant for years. In a 2022 interview, Loebe waxed poetic about Amazon’s vast potential. At the time, the company was valued at about $1.6 trillion, but Loeb believed Amazon held $1 trillion of “untapped value.” He said the online retail sector alone Amazon Web Services (AWS) is worth more than $1 trillion, and its cloud infrastructure division, Amazon Web Services (AWS), is worth $1.5 trillion.
Robb recently suggested that the “most direct consequence” of the rapid adoption of AI is the “acceleration of cloud adoption” for enterprises looking to leverage the large-scale language models that form the foundation of generative AI. This includes the big three cloud providers. Microsoft (NASDAQ: MSFT) Azure, AWS and alphabet‘ is Google Cloud. He also believes that these cloud services are “the ‘pick and shovel’ of the AI gold rush and that ultimately, whichever product ‘strikes gold’ should benefit.”
Loeb increased his Amazon stake by about 21% in the first quarter, bringing his total stake to 5.1 million shares, worth about $930 million and representing about 12% of Third Point’s portfolio. And despite the roughly 3x forward selloff, Amazon is still attractively priced.
AI Stock #2: Microsoft — 9.5% stake
Microsoft (NASDAQ: MSFT) The company has moved quickly to integrate AI across a wide range of products and services, and is credited with kickstarting the mad dash toward AI adoption.
A prime example of this effort is Microsoft Copilot, the company’s AI-powered digital assistant. Copilot offers a suite of features that help simplify and automate time-consuming household tasks to increase productivity. Not only is demand for Copilot strong, but AI is also helping Microsoft increase its Azure cloud market share.
The company has been tight-lipped about how much incremental revenue Copilot has generated so far, but Loeb estimates that “the Copilot software … could be accretive.” [Microsoft’s] “Software sales alone have increased revenue by more than $25 billion.”
Third Point reduced its stake in Microsoft by about 12% in the first quarter, but the total value of its stake increased thanks to dividend payments and a 12% rise in the stock price in the first quarter.
Microsoft stock currently sells at a premium of 36 times earnings. Nevertheless, the company is already one of the early beneficiaries of the AI revolution and is positioned for further gains.
AI Stock #3: MetaPlatform — 7.7% Stake
The ongoing recovery in the digital advertising market may have had an impact on Loeb’s sizable position. Meta Platform (NASDAQ: META)But the company has established itself as a dark horse in the AI space.
Meta has a strong history of leveraging AI to display relevant content to users across social media platforms and target advertising, which generates 98% of the company’s revenue.
Meta’s current efforts are certainly focused on the future. The company recently released the latest version of its Large Language Model Meta AI (LLaMA) available on all major cloud infrastructure platforms, and paid Meta a fee to make it available.
With billions of daily users on its social media platforms, the company boasts a vast amount of data to train its AI systems, which are gaining popularity. It’s also a completely new source of revenue for Meta, but its impact on financial results is not yet clear.
Third Point initiated a position in Meta in Q3 2023 and has increased its stake every quarter since, most recently by 7%. This brings Third Point’s stake to 1.24 million shares, worth $577 million, or roughly 8% of the hedge fund’s holdings.
Loeb didn’t say much about Meta’s position, other than to point out that it was the fund’s biggest winner in Q1. Nevertheless, Loeb focuses on “high-quality companies trading at reasonable valuations,” and Meta certainly meets that criteria. The stock is currently selling for less than 27 times earnings, a discount to its 29x multiple. SNP500.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former Facebook market development director and spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. Danny Bena The Motley Fool has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: Buy the January 2026 $395 call on Microsoft, and Sell the January 2026 $405 call on Microsoft … Public Policy.
Forget Nvidia: Billionaire Daniel Loeb Owns $2.2 Billion in These 3 Top AI Stocks Instead Originally published by The Motley Fool.
