Daniel Loeb Sees Significant Upside Potential for Apple Stock

Billionaire hedge fund manager Daniel Loeb, known for his strategic and often lucrative investments, has expressed strong confidence in Apple’s future stock performance. Loeb believes that Apple’s potential to harness artificial intelligence (AI) effectively within its iOS mobile operating system could significantly increase the company’s stock price.

In a letter to his investors, which Reuters obtained on Friday, Loeb outlined his optimistic outlook for Apple. Despite the recent strong performance of Apple’s stock, Loeb sees “room for significant upside ahead,” driven by the emerging opportunities in AI. This sentiment is based on the belief that the impact of AI on Apple’s business could be far greater than many currently anticipate.

Third Point’s Investment Strategy and Performance:

Loeb’s hedge fund, Third Point, which manages approximately $11 billion in assets, initiated a position in Apple in April of this year. Since then, Apple has become one of the top five contributors to Third Point’s gains in the second quarter.

Specifically, the TP Offshore Fund managed by Third Point posted a 1.8% gain during this period, with nearly a 10% return in the year’s first half. These results highlight Loeb’s strategic timing and confidence in Apple’s long-term potential.

AI as a Catalyst for Growth:

Loeb’s optimism is rooted in the belief that Apple has been “under-owned” by institutional investors who were concerned that the company might miss out on the AI revolution and potentially become an “AI loser.” However, Third Point’s perspective diverges sharply from this view. Loeb argues that AI-related demand could lead to a “step change improvement” in Apple’s revenue and earnings over the coming years.

According to Loeb, one of the key factors driving this potential growth is the anticipated demand for newer iPhone models equipped with Apple Intelligence features. These AI-driven capabilities are expected to be highly attractive to consumers, particularly because they will not be backward compatible with older iPhone models. This could spur an upgrade cycle among existing Apple users, further boosting sales.

Additionally, Loeb sees Apple’s App Store as a crucial component of this growth strategy. As AI continues evolving, the App Store will likely become the primary distribution platform for new consumer-focused AI applications. This positioning could give Apple a significant competitive advantage in the AI-driven digital economy, further enhancing its revenue streams.