Daniel Loeb, founder of hedge fund Third Point, is doubling down on AI investments, expanding his portfolio to include undervalued international semiconductor companies.

In Third Point’s Q3 investor letter released on November 3, the fund disclosed new positions in South Korean memory chipmaker SK Hynix and Japanese semiconductor equipment manufacturer Ebara. Loeb described both companies as industry leaders poised to benefit significantly from AI infrastructure development, noting their valuations are "absolutely reasonable" and trade at a "material discount" compared to U.S. peers.

Despite acknowledging recent underperformance in some areas, Loeb expressed overall optimism about market prospects. He believes sustained AI investments and potential Fed rate cuts could sustain favorable conditions.

**Compute Remains King: NVIDIA and TSMC Still Core Holdings** While diversifying, Loeb remains steadfast in his conviction about AI compute leaders. He emphasized:

*"We still live in a compute-constrained world."*

This theme has driven gains in existing holdings like Taiwan Semiconductor Manufacturing (TSMC) and NVIDIA, which he views as indispensable to AI infrastructure.

Loeb’s team extensively analyzed AI advancements, dismissing concerns about peak compute demand after breakthroughs like DeepSeek’s training efficiency. He argued:

*"Reality has proven the opposite. New AI capabilities, especially inference-based models, demand orders of magnitude more compute than predecessors."*

He believes this acceleration outweighs efficiency gains, fueling exponential growth in AI compute needs. Loeb concluded that AI compute now spans three dimensions: pre-training, post-training, and inference.

**Risk Watch: Monitoring AI Infrastructure and Credit Markets** Despite bullishness, Loeb remains cautious. His team is tracking ecosystem risks that may signal corrections, particularly in AI infrastructure:

*"We’re closely watching unprecedented investments in power and data centers."*

He noted such capital expenditures dwarf the high-yield and leveraged loan markets, warning that supply-demand imbalances are likely.

Meanwhile, Third Point capitalized on credit market opportunities, delivering 4.0% gross returns (3.7% net) in Q3 corporate credit, with year-to-date gains of 7.2% (5.4% net). The fund also exploited distressed situations, including subprime auto lender Tricolor and bankrupt auto parts maker First Brands, leveraging price dislocations in bonds and CLO tranches.