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Dan Loeb’s Strategic Moves: Exiting Tesla and Embracing Nvidia

The month of May has been packed with pivotal data releases. We’ve had no shortage of earnings reports from influential businesses, a Federal Reserve Open Market Committee meeting, and numerous updates on tariff and trade policy from President Donald Trump and his administration.

Amid this sea of data, perhaps nothing has been more telling than the filing of Form 13Fs with the Securities and Exchange Commission (SEC).

No later than 45 calendar days following the end of a quarter, institutional investors overseeing at least $100 million in assets under management (AUM) are required to file a 13F with the SEC. This filing allows both professional and retail investors to see which stocks and exchange-traded funds (ETFs) Wall Street’s leading asset managers bought and sold in the most recent quarter. May 15 marked the filing deadline for 13Fs detailing trading activity for the March-ended quarter.

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Though Warren Buffett is a well-known figure in money management, he’s not the only billionaire fund manager celebrated for substantial investment returns. Dan Loeb, chief of Third Point, also holds significant influence on Wall Street.

At the end of the first quarter of 2025, Loeb managed $6.55 billion across 45 stocks. His investment strategy often involves buying and selling high-growth and widely owned companies, which keeps investors intrigued.

Loeb Completely Exits Tesla

Based on Third Point’s latest 13F, a notable change occurred when Dan Loeb completely exited his position in North America’s electric-vehicle (EV) kingpin Tesla (NASDAQ: TSLA) and shifted focus to Wall Street’s leading artificial intelligence (AI) Stock.

Loeb exited nine positions at Third Point during the first quarter, including shares of social media giant Meta Platforms. However, the sale of 500,000 shares of Tesla stands out. This is significant since Loeb initially acquired 400,000 shares in Q3 2024 and added 100,000 more in the following quarter. Between January 1 and March 31, conditions shifted.

What likely influenced this decision was Tesla’s surging share price, especially after President Trump’s election and Elon Musk’s designation as a “special government employee” for the Department of Government Efficiency (DOGE). Tesla’s stock momentarily doubled following these events. Loeb’s average hold time for stocks is just over 13 months, suggesting he may have been keen to secure profits.

However, there seems to be more beneath the surface of this selling activity. Concerns have risen around Musk’s involvement in DOGE and other ventures potentially hindering Tesla’s growth. Despite seeing sales growth in its energy operations, Tesla’s EV revenue dropped by 20% in Q1 compared to a year earlier.

Additionally, Tesla’s vehicle margins have been trending downward. Musk indicated that pricing is driven by EV demand, and a series of price cuts for models 3, S, X, and Y point toward increased competition or waning demand. Even with these cuts, Tesla has faced challenges in managing its growing EV inventory levels.

Another critical factor is Tesla’s earnings quality. Ideally, first-mover companies should generate profits directly from their products or services. Yet, more than half of Tesla’s pre-tax income stems from automotive regulatory credits—government incentives that don’t necessarily reflect performance. Without these credits, Tesla could have reported a loss for the March-ended quarter.

Lastly, Musk’s history of unmet promises might contribute to Loeb’s departure. Musk has claimed that Level 5 full self-driving would be “one year away” for over a decade and anticipated having 1 million robotaxis on U.S. roads in 2019. Furthermore, the demand for the Cybertruck has been underwhelming. If these factors are excluded from Tesla’s valuation, its Stock could face significant declines.

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Investing in Nvidia: The AI Beneficiary

Looking ahead, Third Point’s 13F reveals that Loeb initiated 10 new positions during the first quarter. While he included some high-yield dividend stocks like telecom giant AT&T and consumer health company Kenvue, a standout addition is premier AI Stock Nvidia (NASDAQ: NVDA).

This marks a return to Nvidia for Loeb, having sold approximately 5 million shares during the third quarter of 2023, considering a 10-for-1 stock split in June 2024. In Q1 of 2025, he acquired 1.45 million shares, currently valued at nearly $196 million.

No company has benefited more directly from the AI surge than Nvidia. Its Hopper graphics processing units (GPUs) and Blackwell GPU architecture are essential for businesses utilizing AI-accelerated data centers. Nvidia’s hardware functions as the driving force behind generative AI solutions and the training of many large language models (LLMs).

Nvidia also capitalizes on the growing demand for AI-specific GPUs. Despite efforts by leading chip manufacturer Taiwan Semiconductor Manufacturing to enhance production capacity, Nvidia struggles to meet the high demand for its products.

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Nvidia’s GPU Pricing Boost Reflects Growing Demand and Market Challenges

When demand for a product outstrips its supply, it is typical for prices to rise. Currently, Nvidia’s Hopper and Blackwell GPUs are commanding a premium compared to rival chips, benefiting the company’s gross margin.

The CUDA software platform also plays a significant role in Nvidia’s influence on Wall Street. Developers use CUDA to harness the computing power of Nvidia GPUs and to create large language models (LLMs). Notably, it serves as a key tool for maintaining client loyalty within Nvidia’s ecosystem of products and services.

Nvidia’s Valuation Appears More Attractive

An important aspect for investors like Dan Loeb is Nvidia’s valuation, which has recently become more appealing. At the end of March, Nvidia’s forward price-to-earnings (P/E) ratio dropped to around 19, looking relatively inexpensive given its consistent growth rate.

Risks Ahead for Nvidia’s Stock Price

Despite this favorable outlook, Nvidia’s stock isn’t guaranteed to rise further. Over the past thirty years, each new technological trend has faced a bubble-bursting event early in its growth phase. Many businesses still lack a clear strategy for artificial intelligence (AI) and are not turning a profit on their AI investments, suggesting that investors may have overestimated the speed of AI adoption and its utility.

Additionally, competition poses a real threat. As both external rivals and internal players intensify their efforts, the scarcity of AI-focused GPUs is likely to decrease. This scenario could negatively affect Nvidia’s pricing power and margins.

Conclusion

Investors should consider the current market dynamics surrounding Nvidia while remaining aware of potential challenges that could affect its future performance.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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