Hedge-fund manager says investors are ignoring Microsoft and other Big Tech names for the sake of the "new new thing," like chip stocks.
Bill Ackman, CEO of Pershing Square Capital Management, shown here at the Milken Institute Global Conference in May, says investors are overlooking some "high-quality things."
Market history is being repeated, and not in a good way, as investors chase red-hot stock sectors just like they did in 2000, billionaire investor Bill Ackman says.
"What's interesting about markets is people always bring their eye to the new new thing, and the new thing is chips and semiconductors and energy, and that's where the short-term capital is going. What tends to happen is really high-quality things get left behind," the founder and chief executive of Pershing Square Capital Management told the "All In" podcast in an episode published on Wednesday.
Ackman said parallels to the dot-com bubble have to do with market psychology. "And the analogies are that people got excited about internet stocks, and Berkshire Hathaway traded at the lowest valuation I think it ever traded in its history," he said.
Investors in those days referred to Berkshire as "old stuff," and Ackman sees that same attitude now being applied to companies like Amazon, Meta $(META)$ and Microsoft $(MSFT)$ - which he said is leaving those Big Tech names, all three of which he owns, undervalued.
The hedge-fund manager said last month that he took a new position in Microsoft in February after the stock fell following earnings, calling the company an artificial-intelligence winner.
Investors these days are either indirectly or directly invested in AI, he said, "or it's a threat. So you have to understand it." As a long-term investor, it's important to determine the risk of disruption to a business, the probability of which these days "has gone up enormously," he said.
Ackman, who was among those calling for investors to buy stocks during the pandemic dip, was also calling for stocks to go higher a month ago. "Stocks just got crazy cheap, just incredibly cheap, really high-quality companies," he said.
As for the software selloff seen this year, Ackman said a very "careful analysis" of companies is required, adding that he'd worry about a company like Salesforce (CRM).
"If you're a software company today, you have to be as AI enabled as you can," he said. "I think there has been some monopolistic-type profit taking off of customers, when someone had a niche software product, they're charging $30,000 a year or something like this. I think those companies are really at risk."
As for upcoming Big Tech initial public offerings, such as SpaceX's, Ackman said he's interested in what the company will look like five years from now. "SpaceX is near monopoly in terms of low-cost space launch. That's going to become increasingly important," he said.
He said that OpenAI, which is also planning for an IPO, has an interesting business model but needs to get the message out about how it is committing capital.
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