Dan Loeb: AI Might Do For Credit In 2025/26 What Fracking Did In 2015/16

Dan Loeb’s Second Quarter 2025 Investor Letter offers a compelling glimpse into the strategies driving Third Point’s performance. With the flagship Offshore Fund returning 7.5% for the quarter, Loeb highlights the resilience and opportunism that defined their approach.

“The Second Quarter began tumultuously, as ‘Liberation Day’ and subsequent forecasts of an imminent recession spooked markets,” he notes. Yet, by quarter’s end, sentiment shifted dramatically: “Economic data turned upwards, and favorable AI data points drove a rebound in markets and our portfolio.” This ability to navigate volatility and capitalize on dislocations underscores Third Point’s agility.

One standout success was Nippon Steel’s takeover of US Steel, which contributed “200bps gross (188bps net) to performance.” Loeb attributes this win to the unique intersection of policy and market noise: “We believe this outsized return opportunity arose from the cross currents of trade policy, industrial policy, and the MAGA agenda that created noise and kept certain investors away from the situation.”

His emphasis on risk arbitrage as a compelling strategy reflects a broader theme: identifying overlooked opportunities where others see uncertainty.

In technology, Third Point’s re-initiation of a position in Nvidia exemplifies their contrarian instincts. Loeb explains, “We re-initiated a position in Nvidia, which we believed had sold off sharply due to tariff concerns, recession fears, rack deployment slowdown and increased scrutiny of prospective ROI of new data center capex.” This move paid off as AI-driven optimism resurged, reinforcing their belief in the sector’s long-term potential.

The letter also delves into specific investments like Rocket Companies, where Loeb sees transformative potential in its acquisition of Mr. Cooper. “Combining the largest refi originator with the largest servicer will, we believe, enable pro forma Rocket to turn ecosystem unit economics on its head,” he states. The integration of AI further bolsters their thesis: “Rocket has begun to realize the benefits of automating workflows – from income verification to document submission, to credit score verification – in ways that set it apart from others in the industry.”

Casey’s General Stores, another highlight, showcases Third Point’s knack for spotting undervalued gems. “It is a ‘boring’ business to some, but there is an art to boring,” Loeb quips, praising its counter-positioning and loyal customer base. His enthusiasm is palpable: “How many companies have the luxury of replicable, accretive M&A at EBITDA multiples that are half of its own trading levels?”

In credit markets, Loeb observes parallels to past cycles, noting, “AI might do for credit in 2025/26 what fracking did in 2015/16.” His team’s focus on leveraged loans and structured credit reveals a disciplined approach to risk and reward. “Being nimble on trading has enabled us to source sizeable opportunities that seek to generate capital appreciation,” he concludes.

You can read the entire letter here:

Third Point Q2 2025 Letter