Altimeter Capital, an investment firm managed by Brad Gerstner, has recently divested a significant portion of its holdings in Meta Platforms Inc. (NASDAQ: META), highlighting concerns regarding Meta's positioning in the artificial intelligence (AI) sector. Gerstner conveyed on CNBC's "Halftime Report" that while Meta had been part of Altimeter's portfolio since late 2022, the social media company is currently not leading the market in AI technology.
Originally, Altimeter Capital entered Meta’s stock when shares were priced near $90, capitalizing on the company’s turnaround and efficiency measures that propelled its share price beyond $700. This strategy aligned with Gerstner’s earlier endorsements of operational efficiency. However, he now describes Meta as undergoing a "tough transition" in fully leveraging AI capabilities, despite its recent attempts, such as revitalizing AI research teams.
Gerstner stated candidly that "the fact of the matter is, they're not market leaders today in AI." While recognizing Meta as a potential beneficiary of AI advancements, he prefers allocating capital towards companies with lower valuation multiples and more immediate catalysts for growth within this "stock pickers market."
Redirection to AI Infrastructure Investments
Altimeter has adjusted its strategy by concentrating on what Gerstner refers to as the "picks and shovels" of the AI boom—companies that provide the fundamental infrastructure supporting AI expansion. The firm's largest investments now include notable infrastructure and hardware providers such as Nvidia Corp. (NASDAQ: NVDA), Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM), and cloud services provider CoreWeave Inc. (NASDAQ: CRWV).
Gerstner highlighted that many investors underestimate the scale of the current AI supercycle. According to him, major technology companies spent approximately $150 billion on capital expenditures in 2023 to expand data center capacity. This investment volume is anticipated to exceed $500 billion by 2026, encompassing confirmed purchase orders, physical construction, and power infrastructure development. This level of commitment underscores the tangible expansion underpinning AI progress.
Valuation Perspective on Nvidia
Addressing concerns about Nvidia’s stock price, which is among Altimeter’s top holdings, Gerstner defended the valuation despite its sharp run-up. With consensus analyst estimates projecting a 65% increase in earnings for the company this year, he considers Nvidia’s price-to-earnings multiple of roughly 25 as reasonable and not overly demanding.
He noted that Altimeter does not rely on multiple expansion to meet its return targets. Instead, the firm expects Nvidia to realize its projected earnings growth to generate the desired investment returns.
Performance and Market Trends of Meta
Regarding Meta's recent market performance, shares have declined by slightly over 8% in the past six months, although they have appreciated 6.92% over the past year. On the most recent trading day, the stock modestly increased by 0.28% to $660.62 per share, with a slight after-hours decline of 0.21%.
Analysts’ rankings, such as those from Benzinga’s Edge Stock Rankings, show that Meta demonstrates a weaker price trend over the medium and long terms, contrasted with a strong short-term trend and solid quality scores. These mixed signals reflect the current uncertainties surrounding Meta’s market positioning and momentum.
Summary of Investment Approach
In summary, Altimeter Capital’s divestment from Meta signifies a strategic move in response to perceived challenges within Meta’s AI trajectory. The firm is instead channeling investments into infrastructure providers whose growth prospects appear clearer amid an expected expansive AI investment cycle. Altimeter’s stance is grounded in measurable capital expenditures and established market dynamics rather than speculative projections, focusing on tangible factors like purchase orders, physical assets, and power build-out supporting AI capabilities.