Super Investors Are Buying AI Stocks

Key Concepts

• Moat: A sustainable competitive advantage that protects a company's market share and profitability.
• Concentrated Portfolio: An investment strategy focusing capital on a small number of high-conviction stocks rather than broad diversification.
• Compounding Machines: High-quality companies with strong fundamentals, wide moats, and consistent growth.
• Anchoring Bias: A psychological trap where investors fixate on a previous price (e.g., a lower sell price) and refuse to buy back in at a higher price.
• Capex (Capital Expenditure): Funds used by a company to acquire, upgrade, and maintain physical assets.
• Forward P/E (Price-to-Earnings): A valuation metric that divides the current share price by the estimated future earnings per share.

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Analysis of Super Investor Portfolios

Chris Hohn (TCI Fund)

• Strategy: Highly concentrated (approx. 10 US stocks), prioritizing companies with the widest possible moats and high barriers to entry.
• Key Moves: Reduced Microsoft holding by 83% (from 11% to 2% of the portfolio) due to concerns that AI is eroding Microsoft’s software and cloud (Azure) moats.
• Reallocation: Increased positions in Google, Moody’s, Visa, and S&P Global.
• Perspective: Hohn prioritizes moat integrity over valuation. He is willing to buy back into companies (like Google) at higher prices if he believes the fundamental risks have decreased, demonstrating a lack of ego-driven anchoring bias.

Bill Ackman (Pershing Square)

• Strategy: Concentrated, but with a higher tolerance for varying types of moats compared to Hohn.
• Key Moves: Executed the inverse of Hohn by dumping his entire Google position to build a 15% stake in Microsoft.
• Perspective: Ackman views Microsoft’s core software suite as highly resilient against AI disruption. His portfolio is anchored by cloud operators (Microsoft, Amazon) and cash-flow-generative businesses like Brookfield and Uber.

Dev Kantesaria

• Strategy: Sticking to original convictions despite a difficult year (estimated ~20% YTD decline).
• Key Moves: Maintained his 25% position in FICO despite short-selling pressure from analysts like Steve Eisman. Sold one-third of his Visa position while keeping Mastercard, likely due to a preference for Mastercard’s diversified value-added services. Added to ASML, citing its technological lead.

Berkshire Hathaway (Greg Abel)

• Strategy: Transitioning away from stocks managed by former managers (like Todd Combs) to focus on businesses the current management team understands deeply.
• Key Moves: Liquidated positions in Pool Corp, Domino’s, Mastercard, Visa, and Amazon.
• Perspective: The selling is interpreted as a strategic cleanup rather than a bearish signal. The significant new buys in Google indicate a strong vote of confidence in the company’s dominance.

Other Notable Investors

• Terry Smith (Fundsmith): Struggling due to a lack of exposure to the "Big Tech" AI-driven bull market. The fund’s conservative, consumer-staple-heavy approach has led to significant underperformance compared to the S&P 500 and QQQ since 2021.
• Pat Dorsey: Showing strong performance with new positions in Uber, S&P Global, AppLovin, and Sunbelt Rental Holdings.
• Li Lu (Himalaya Capital): Maintains a massive ~50% concentration in Google, signaling extreme long-term conviction.
• Chuck Akre (Akre Capital): Shifting toward newer companies (e.g., Salesforce, Service Now) with evolving landscapes, which may lower the overall quality of the portfolio compared to his historical focus on high-return-on-capital businesses.

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Fail of the Week: Waymo

• The Incident: Residents in a Northwest Atlanta neighborhood reported dozens of driverless Waymo vehicles circling their cul-de-sacs repeatedly between 6:00 AM and 7:00 AM.
• Technical Context: The vehicles were likely programmed to "idle" in low-traffic areas to avoid congestion before the morning commute. However, the lack of coordination led to a "bunching" effect, creating a bizarre and slightly unsettling experience for residents.
• Outcome: The vehicles were easily stopped by simple physical obstacles (like "kids at play" signs), highlighting a need for better navigation logic in residential zones.

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Synthesis and Conclusion

The current landscape of "super investors" reveals a clear divide regarding the future of Big Tech. While some (Hohn) are wary of AI-driven pressure on Microsoft’s moat, others (Ackman) see it as a cornerstone investment. Despite these disagreements, the overarching trend is a flight to quality: investors are avoiding high-volatility tech (like Nvidia or Micron) in favor of "compounding machines"—companies with deep, defensible moats and predictable cash flows. The primary takeaway for individual investors is to focus on business fundamentals and moat durability rather than attempting to time market valuations or letting ego prevent re-entry into winning stocks.