Dan Loeb says the AI boom is a far cry from the dot-com bubble.
The billionaire investor told the "Invest Like The Best" podcast that he's unfazed by Big Tech companies spending hundreds of billions of dollars on microchips and data centers to power AI models.
"If you don't believe the capex numbers are going to yield a return, then you would have to believe that they're just flushing money down the toilet," Third Point's founder and CEO said during an episode released Thursday.
Alphabet, Microsoft, Amazon, and Meta have said they'll invest upward of $700 billion combined this year, and $1 trillion next year, with the vast majority of their spend going toward AI.
Third Point, which manages around $24 billion of assets, counted a $404 million stake in Amazon as its largest position at the end of March, per its latest portfolio update. It also listed Alphabet, Meta, and Nvidia among its holdings.
Loeb said he's not concerned, given Big Tech's earnings are "really strong," and they're "generating enormous amounts of cash," allowing them to fund a big chunk of the outlay "off their balance sheets."
"It's very different from the dot-com bubble, which we were short going into, and had good numbers in those years," the hedge fund manager said.
In contrast to the late 1990s and early 2000s, Loeb says he doesn't see a "valuation bubble."
He pointed to Claude-maker Anthropic's strong revenue growth, the rapid adoption and usefulness of its products, and the buzz around its upcoming models.
Anthropic announced Thursday that it raised money at a $965 billion valuation in its latest funding round, up from $380 billion in February. Its annualized revenue soared from $14 billion to $47 billion over the same period.
"You can make a good argument we're barely scratching the surface," Loeb said. "There are so many layers of corporations that are just getting started, so I'm in the optimists' camp."
Excitement around AI has catapulted stocks to record highs, but skeptics, including Michael Burry of "The Big Short," have sounded the bubble alarm, warned demand will cool, and predicted Big Tech companies won't see a return on their huge investments.
