Michael Burry and Bill Ackman's Contrarian AI Stock Picks
· news
The Unlikely Titans: Burry and Ackman’s Contrarian Play
Michael Burry and Bill Ackman, known for their contrarian views, have made significant investments in S&P Global and Adobe. Their reasoning is straightforward: these companies’ core businesses are less susceptible to disruption by artificial intelligence (AI) than investors believe.
Burry’s focus on Adobe may seem counterintuitive at first glance. The company’s Creative Cloud suite has been a stalwart of the industry for decades, but Burry sees the market pricing its shares as if its entire business model is under threat from AI. In reality, Adobe’s customers are not looking to replace their software suites with raw AI models. The company’s moat lies in its workflow and ecosystem – enterprises are too deeply invested in Adobe’s tools to switch overnight.
Adobe’s Experience Cloud serves over 12,000 enterprise customers, including most of the Fortune 500. These companies have spent years training their creative teams on Adobe software, and integrating file formats like PSD into their workflow is a complex task that cannot be replaced by AI-generated images. Burry’s thesis is not that Adobe will escape disruption entirely, but rather that its core business will continue to thrive as long as its customers remain locked into the company’s ecosystem.
Ackman’s investment in S&P Global is similarly grounded in a nuanced understanding of the market. The company’s financial data business has taken a beating over concerns that AI will commoditize and make it cheap. However, Ackman sees this fear as misplaced – S&P Global’s core businesses are not just about data lookup, but also ratings and indices, which produce high margins and have regulatory moats around them.
One of the key drivers of S&P Global’s growth will be the refinancing of pandemic-era borrowing in 2027 and 2028. This process will see billions of dollars worth of debt issued, providing a boost to the company’s ratings business. Additionally, the shift from active funds to passive index funds will continue to feed into the company’s indices business.
Ackman believes that these growth drivers are already priced into the market, making the stock an attractive opportunity for contrarian investors. While there are risks involved – private credit is a quiet threat to S&P Global’s ratings business, and a recession could choke debt issuance – Ackman’s thesis is that these risks are already reflected in the company’s valuation.
Investors should take a step back from the hype surrounding AI and look at these companies through a more nuanced lens. Burry and Ackman are not betting on these stocks because they expect them to grow exponentially, but rather because they believe their core businesses will continue to thrive despite the market’s fears about AI disruption.
In an era where tech stocks have been king, it’s refreshing to see investors like Burry and Ackman challenging conventional wisdom. Their reasoning may not be for everyone, but one thing is certain: these two titans of Wall Street are not afraid to challenge conventional wisdom in pursuit of profit.
Reader Views
- RJReporter J. Avery · staff reporter
Burry and Ackman's investment strategies are intriguing, but one crucial aspect they often overlook is the role of regulatory tailwinds in bolstering their chosen stocks. For instance, S&P Global's regulatory moats are largely a function of its compliance with strict standards governing credit ratings, which AI systems struggle to replicate due to nuances in human judgment and risk assessment. This is an area where Burry and Ackman have room for growth – by leveraging government support to solidify their market positions, they could reap long-term benefits from their contrarian bets.
- CSCorrespondent S. Tan · field correspondent
It's refreshing to see Burry and Ackman take on the AI-hysteria head-on with their contrarian picks. However, one must consider the broader implications of their thesis: are these companies merely delaying the inevitable disruption? As AI continues to mature, even entrenched ecosystems like Adobe's will face increasing pressure to adapt. The question is whether Burry and Ackman's investments will prove to be savvy long-term plays or a temporary reprieve from the coming storm.
- ADAnalyst D. Park · policy analyst
While Burry and Ackman's contrarian views on AI disruption are intriguing, we should not overlook the regulatory risks inherent in their picks. As S&P Global's ratings business relies heavily on government backing, any regulatory shift could severely impact its profitability. Similarly, Adobe's dependence on enterprise customers may be a double-edged sword: if these companies begin to transition away from Adobe's ecosystem, even Burry's moat won't shield the stock from decline.