Tech-Focused Tiger Cubs Notch January Gains Amid DeepSeek Drama

In January 2025, hedge funds run by proteges of the late Julian Robertson, known as the "Tiger Cubs," notched significant gains despite the market volatility sparked by the emergence of Chinese AI upstart DeepSeek and threats of tariffs. Tiger Global Management gained 6.3%, Coatue Management returned 4.4%, Whale Rock Capital Management's main fund rose 8.4%, and Viking Global Investors climbed 2%. D1 Capital Partners' public equity portfolio gained 7.7%, excluding its private wagers, which make up roughly 60% of the firm's assets. The S&P 500 rose 2.7%, and the Nasdaq returned 1.6% in January.

The Tiger Cubs' strong performance can be attributed to their tech-focused investment strategies and the resilience of the tech sector. However, the DeepSeek drama has raised concerns about the future of AI-related stocks and the potential impact on the Tiger Cubs' portfolios.

Meta Platforms Inc. (META), a significant holding for many Tiger Cubs, including Tiger Global Management, Coatue Management, and Lone Pine Capital, rallied 65% last year. However, the DeepSeek breakthrough has raised questions about the need for advanced AI chips and the increasing demand for electricity, which could impact Meta's future prospects. Microsoft (MSFT), another major holding for the Tiger Cubs, invested $13 billion in ChatGPT creator OpenAI. The DeepSeek drama led to a selloff in AI-related stocks, including Microsoft, which closed nearly 18% higher in January. The company's investment in OpenAI and its integration of AI throughout its platforms and products could be at risk if DeepSeek's cheaper and more energy-efficient model gains traction.

Alphabet (GOOGL), the parent company of Google, was also a significant holding for the Tiger Cubs. The company's AI efforts, particularly its use of AI in search and other products, could be impacted by the DeepSeek breakthrough. Alphabet's stock price has been volatile in response to the DeepSeek drama, but it remains a significant holding for the Tiger Cubs.

In response to the DeepSeek drama, the Tiger Cubs have adjusted their strategies in the following ways:

1. Reducing exposure to popular tech bets: Some Tiger Cubs, such as Contour Asset Management and Rubric Capital, have reduced their exposure to popular tech bets, such as Nvidia, Apple, and Amazon. They have focused on other sectors, such as power companies that will benefit from the growing demand for electricity from data centers.
2. Increasing exposure to private equity and venture capital: Some Tiger Cubs, such as D1 Capital Partners, have increased their exposure to private equity and venture capital, allowing them to invest in upstart firms that could be worth a lot down the line. This strategy helps them avoid the volatility and competition in the public markets.
3. Focusing on long-term trends: The Tiger Cubs' investment philosophy centers on identifying exceptional growth companies, often in the technology sector, that are disrupting traditional industries. They blend fundamental analysis with a focus on long-term trends, which allows them to make concentrated bets on companies like Facebook and JD.com in their early days.

In conclusion, the DeepSeek drama has had a significant impact on the Tiger Cubs' portfolios, particularly their holdings in Meta Platforms, Microsoft, and Alphabet. In response, they have adjusted their strategies by reducing exposure to popular tech bets, increasing exposure to private equity and venture capital, and focusing on long-term trends. Despite the challenges posed by the DeepSeek breakthrough, the Tiger Cubs' tech-focused investment strategies have contributed to their strong performance in January 2025.