In his latest Q2 2023 Letter, Dan Loeb says his funds performance was hurt by its exposure to value stocks, which have underperformed growth stocks in recent months. He also says that understanding the impact of AI is essential to successful stock selection. Here’s an excerpt from the letter:
Against this economic backdrop, we believe Artificial Intelligence will have far reaching effects on the economy, public equities, and society, and understanding its impact is essential to successful stock selection. As has always been the case with disruptive new technologies, the initial applications of AI can seem somewhat trivial.
But while we may marvel at the images generated by Dall-E or be amused by the South Park episode written by ChatGPT, we believe we are living in the early stages of a profound economic upheaval.
Though it may sound hyperbolic to compare AI to the advent of fire or the wheel as some “AI maximalists” have suggested, we believe generative and other forms of AI could compare to the Industrial Revolution but compressed into a period of months and years rather than decades.
One need only look to two watershed events this year to see signs that the impacts of AI are already occurring:
1) the reporting of Nvidia’s Q1 astronomical earnings beat and forward guidance; and
2) Microsoft’s introduction of its AI-assisted Office Copilot software, which could increase its revenues by as much as $25 billion or more on software sales alone.
While it is impossible to quantify precisely, we are confident that from a macroeconomic standpoint, AI will have enormous impact on labor productivity, business profit margins, and individual well-being, and act as a counter to the inflationary pressures that have emerged over the last few years. We expect enterprise applications to dramatically accelerate by the early part of 2024.
You can find the entire letter here:
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