On the same rake: Bill Ackman sees AI rally as a repeat of investors' mistake of 2000

Investors are repeating the mistake of the dot-com bubble: like a quarter of a century ago, they are chasing sectors where shares are growing fastest and have stopped noticing quality companies, warned billionaire Bill Ackman, founder of Pershing Square investment company. Now, he said, capital is concentrated in the securities of chip and energy producers for AI, while the shares of three technology giants are trading unreasonably cheap, MarketWatch writes.

"What's interesting about the markets is that people are always looking at the new fashion trend, and right now it's semiconductors and energy - that's where speculative capital is going. As a result, the really high-quality assets tend to get overlooked," Ekman said on the latest episode of the All In podcast.

The billionaire, who describes himself as a Warren Buffett fan, drew a parallel with 2000 in terms of market psychology: "People were on fire for Internet stocks back then, and Berkshire Hathaway was trading at, I think, the lowest valuation in its history." In those years, investors called Buffett's investment company "junk," and now a similar attitude is emerging toward Amazon, Meta and Microsoft, he stated. All three stocks are in Pershing Square's portfolio.

Ekman believes that traders can no longer ignore AI: they have either invested directly or indirectly in the sector themselves, or they may find that the introduction of neural networks will disrupt the business of the companies in their portfolio. For the long-term investor, this means that it is now particularly important to assess the risk of technological displacement: its likelihood has "increased enormously".

"The software apocalypse," according to Ekman, requires a very "careful analysis" of businesses. He noted that he would worry about the fate of issuers like Salesforce: "If you're a software developer, today you have to build AI into your products as much as you can."

The founder of Pershing Square sees vulnerability in niche software vendors who have long had the ability to dictate prices. "I think there was a kind of monopoly super-profit extraction at the expense of customers, where someone with a niche software product was charging $30,000 a year or so for it. I guess companies like that are really at risk right now," the businessman pointed out.

Speaking about the high-profile IPOs expected this year, Ackman admitted that he is interested in what these companies will be like in five years. "SpaceX is almost a monopoly in low-cost space launches. It's going to become more and more important," the investor said. OpenAI has an interesting business model, but it needs to do a better job of explaining to the market how it manages capital, the Pershing Square head added.

The concentration of Pershing Square's investment portfolio is extremely high. At the end of March, its public portion included just seven core assets that accounted for 99% of its weight. These are securities of Brookfield, Amazon, Uber Technologies, Microsoft, Restaurant Brands, Meta Platforms and Howard Hughes.

To open a position in Microsoft in the first quarter, Eckman had to part with a stake in Alphabet. "I want to be clear: the sale of Alphabet shares was not a bet against it. In the long term, we are extremely optimistic about Alphabet. But at current valuations and in light of our capital constraints, we used this position as a source of funds to [buy the securities of] Microsoft," the billionaire explained in May this year.

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