Loeb: AI Keeps Large-Cap Tech Most Attractive

Dan Loeb, founder of hedge fund Third Point, told the podcast that accelerating adoption of artificial intelligence keeps large-cap technology the most attractive sector for capital allocation. He noted the fund retains a majority of its capital in tech.

Loeb argued the combination of strong earnings momentum and expanding AI use supports what he described as an attractive risk-reward profile for major technology companies. He considered trimming positions such as Nvidia but judged current valuations justified by expectations for continued growth.

Loeb warned, ‘Unless you take a very negative, almost draconian view that AI growth rolls over later this decade, tech is the most attractive sector right now.’

He pointed to gains in semiconductors, memory, semiconductor equipment and AI-linked infrastructure, and the fund also holds positions in aerospace and defense. Those sector bets helped Third Point outperform the broader market in the first quarter, even though the fund posted a modest negative return for the period.

Loeb reflected on past errors, citing Third Point’s exposure to the failed crypto exchange FTX in 2022 as a lesson in due diligence. The firm increased internal verification after finding that rapid growth and high-profile backers had masked problems. Verification now includes closer checks of basic financial metrics such as cash balances.

Loeb added the firm still sees value in venture-backed companies and that most founders act in good faith despite occasional governance failures.

On credit, Third Point traded acquisition-financing debt tied to Elon Musk’s purchase of Twitter, buying when the wider credit market was cautious and seeing the debt recover as the outlook stabilised. The fund also underwrote credit linked to xAI despite limited cash-flow visibility at issuance after assessing business quality and connections within Musk’s technology ecosystem.

Loeb noted experience across public and private markets continues to shape Third Point’s approach to assessing complex technology businesses. He emphasized active verification of financials and a willingness to back credits or securities when analysis supports the underlying case.