Bill Ackman Warns Investors Are Repeating Costly 2000s Mistake: Chasing the 'New New Thing'

Hedge fund manager Bill Ackman is known for making highly profitable trades. For instance, he turned $27 million into $2.5 billion in 10 days at the height of the COVID-19 pandemic.

After closing a $5 billion initial public offering (IPO) in April to take his firm Pershing Square public, billionaire investor Ackman recently said in an All In podcast interview that history is repeating itself in a not-so-good way as investors flock to white-hot stocks just like they did during the 2000 dot-com bubble.

'What's interesting about markets is people always bring their eye to the new new thing, and the new thing is chips and semiconductors and energy, and that's where the short-term capital is going. What tends to happen is really high-quality things get left behind,' Ackman had said in the interview published on Wednesday.

Ackman said parallels between today's markets and the dot-com bubble have to do with market psychology. 'And the analogies are that people got excited about internet stocks, and Berkshire Hathaway traded at the lowest valuation I think it ever traded in its history,' he had stated.

Back then, investors had described Berkshire Hathaway as 'old stuff', and Ackman sees investors with the same attitude when it comes to companies like Amazon, Meta, and Microsoft, which he believes are still undervalued.

In May, Ackman revealed that his hedge fund opened a new position in Microsoft in February after the stock price fell post earnings results. Ackman believes the company is an AI winner.

We Are All Invested in AI in Some Way

Ackman believes investors are indirectly or directly invested in AI today, which 'could be a threat', because as a long-term investor, one must assess the disruption risks to a business, the likelihood of which has 'enormously' increased recently.

Ackman had urged investors to pile on US stocks due to the COVID-19-induced crash earlier this decade. He was also predicting in May that stocks are now cheap but would soon go higher. 'Stocks just got crazy cheap, just incredibly cheap, really high-quality companies,' he had mentioned earlier.

However, Ackman had cautioned that a very 'careful analysis' of companies is imperative amid the ongoing software stocks selloff, adding that he would be concerned about companies like Salesforce.

'If you're a software company today, you have to be as AI-enabled as you can. I think there has been some monopolistic-type profit taking off of customers, when someone had a niche software product, they're charging $30,000 a year or something like this. I think those companies are really at risk.'

Regarding the upcoming blockbuster IPOs, like SpaceX and OpenAI's, Ackman remains interested to see how the company turns out to be five years from now. 'SpaceX is near monopoly in terms of low-cost space launch. That's going to become increasingly important,' he had mentioned.

Lastly, Ackman concluded that OpenAI has an intriguing business model but needs to provide investors with more clarity about its capital commitments.

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