Billionaire Daniel Loeb Was Buying 3 of My Favorite AI Stocks in Q1. Here's Why It's Not Too Late to Buy Them.
Key Points
As the most complete AI company, Alphabet looks well positioned to be a long-term winner.
Meta Platforms has been one of the best companies at using AI to drive revenue growth.
While its stock slid after its recent quarterly report, Broadcom still has huge potential to grow its custom chip design business.
- 10 stocks we like better than Broadcom ›
Billionaire hedge fund manager Daniel Loeb of Third Point Management was busy making adjustments to his portfolio in Q1, trimming some positions while adding new ones. Among the stocks he bought during the period were three of my favorite artificial intelligence (AI) stocks, and they're still attractive buys right now.
Alphabet
It has been a couple of years since Loeb had a stake in Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), but he opened a new one in Q1, and it's easy to see what he may like about the stock. While it's best known for Google Search, Alphabet is the most complete AI company, having developed both top-tier AI chips and models.
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The company's biggest edge is arguably its Tensor Processing Units (TPUs), custom chips it began developing more than a decade ago, and which it optimized its entire ecosystem around. TPUs give it a big cost advantage when training its AI models and running inference workloads. They are also becoming a big new revenue source for Alphabet, as it is leasing them to Google Cloud clients and also sells them directly to select customers.
By having its own AI models, it also saves costs within its cloud computing unit by not always having to pay for third-party LLMs, although it also offers models other than its own. It also uses its Gemini models to power the AI features across Google Search and other products, which has been driving growth. Additionally, Alphabet has a big distribution edge (through its ownership of Chrome, Android, and its revenue-sharing deal with Apple) and one of the world's largest digital ad networks.
Add it all up, and this is a stock poised to be a long-term winner.
Meta Platforms
During the first quarter, Loeb also reopened a position in Meta Platforms (NASDAQ: META). (He'd sold out of his last position in Q1 2025.) Meta has been one of the best companies at harnessing the power of AI and incorporating it into its core business to drive growth. It's using AI to continually improve its recommendation algorithm, which is keeping users on its sites much longer. At the same time, it's using AI to help advertisers better target users, automate bidding, and make better creative campaigns.
The results have been impressive. The company grew its revenue by 33% last quarter as ad impressions jumped 19%. Meanwhile, because its ads are more effective, it was able to raise ad prices by 12%. While investors have fretted over Meta's heavy spending on AI infrastructure, the company has been seeing great returns on its investments. It also has a nice opportunity as it is now just starting to serve ads on the popular messaging platform WhatsApp and is still building out its newest platform, Threads.
Trading at a forward P/E ratio of just 17.5, the stock is too cheap for its growth, positioning, and prospects.
Image source: Getty Images.
Broadcom
Another AI stock Loeb picked up in Q1 was Broadcom (NASDAQ: AVGO). While the stock is up from the prices it was trading at during that period, investors do have a nice opportunity to get into it after its sizable post-earnings dip.
That slide in its shares came despite the fact that Broadcom is seeing strong growth driven by its custom chip business. The company helped Alphabet develop its TPUs and is benefiting from its huge data center infrastructure spending. Broadcom expects AI semiconductor revenue of $56 billion this fiscal year, and management forecasts that figure will rise to well over $100 billion next year. In addition to Alphabet, it also has large commitments from Anthropic, OpenAI, and Meta. Its custom chip business also feeds into its data center networking business, which is seeing strong growth.
As hyperscalers continue to develop their own custom chips and diversify their compute power away from Nvidia's graphics processing units (GPUs), especially for inference workloads, Broadcom is poised for tremendous growth in the coming years. That makes the recent dip in its shares a great opportunity to buy the stock.
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Geoffrey Seiler has positions in Alphabet, Broadcom, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Apple, Broadcom, and Meta Platforms. The Motley Fool has a disclosure policy.
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