Dan Loeb’s Third Point adds to Google, TSM, opens new position in AAP

Third Point, an activist hedge fund led by Daniel Loeb, said Tuesday it has made “a substantial investment” in Alphabet (GOOGL), despite concerns regarding the impact of large language models and artificial intelligence (AI).

“We have owned Alphabet in the past and have long admired its exceptional business model and its proven ability to maintain a leading position across an array of preeminent products such as Search, Gmail, Android, GCP, and YouTube,” Loeb wrote in Third Point’s Q1 Investor Letter published on Tuesday.

He noted that while concerns about the impact of AI on Alphabet’s (NASDAQ:) core business are not without merit, the company holds significant advantages in distribution and technology compared to its competitors.

Loeb emphasized that Alphabet is well-placed to leverage its AI expertise to integrate, improve, and more effectively monetize its comprehensive product range. Moreover, he highlighted that the company has established two of the foremost AI research entities, Google Brain and DeepMind, which have been instrumental in advancing large language models.

“We believe the moment when Gemini takes a seat at the economic table is approaching,” Loeb continued.

In addition, Loeb also told investors that his hedge fund increased its investment in TSMC (TSM) during the quarter, which was initially established in May of the previous year.

TSMC has recently experienced its most challenging year since the Global Financial Crisis, but looking ahead, Loeb sees a dual catalyst for the company’s substantial earnings growth: a cyclical recovery combined with structural growth driven by increasing demand for AI.

“We view TSMC as the “toll road” of the semiconductor industry, particularly for AI compute. TSMC holds more than 90% market share for leading edge semiconductor manufacturing, where all AI silicon is being processed,” he wrote.

Furthermore, Loeb said the fund also opened a position in Advance Auto Parts (NYSE:) in Q4 2023 at a compelling entry point. This decision came after the company’s third consecutive guidance reduction for the year, which had overshadowed new CEO Shane O’Kelly’s strategic plans to steer the business back on course.