Show Me the Money!Markets are shifting from AI euphoria to demanding real cash flow. Private credit cracks, circular AI financing, and stretched valuations are raising hard questions about sustainability. As growth slows and multiples compress, 2026 is shaping up to be a true “show me the money” year for investors.
When Money Becomes MercenaryFrom an index perspective, it has been a lackluster start to the year. At the time of writing, markets have made very little ground over the first 6 weeks. The good news – it”s still early. However, given the incredible…
3-Years Since ChatGPT Launched… What’s Changed? The seismic shift triggered by ChatGPT 3 years ago reminds me of 1995 when Netscape hit our screen. But as we approach the year 2000 - several "greey swans" emerged. Could 2026 be similar. This post discusses some of the possible risks looming for next year. This AI revolution has many of the hallmarks we saw some 30 years ago; i.e., creating extreme capital concentration in giants like Nvidia. As we enter what I think is a late-cycle phase, our focus shifts to systemic risks—from AI disillusionment to credit volatility.
Nvidia is Cheaper… But Not CheapNvidia's latest quarterly numbers were very impressive - producing 78% sales growth. They dominate the market for AI chips. A small nitpick could be the three point decline in gross margins (but that's expected). Let's not forget - those gross margins are still 73%. No-one else comes close in the semiconductor industry. So why would the stock tank 8.5%? Simple: expectations. The market knew that Nvidia was going to grow at revenue at least 70%+ where gross margins would be north of 70%. But growth is slowing (as they get bigger) and margins are declining (as competition starts to ramp up)
Investor’s (Valid) Capex Concerns w/AILarge-cap tech's planned capex for 2025 is worrying investors. What will be the return on that capital? Never before have these companies made such large bets. Before DeepSeek, it was assumed the tech giants - with their deep pockets and almost limitless resources - would enjoy a wide moat in the AI arena. And from there, that justified the high valuation multiples. Not now. DeepSeek’s arrival challenges those long held assumptions (and valuations).
Investors Starting to Question AI’s ROICAI investors were caught off guard this week on news of China's ChapGPT rival "DeepSeek". It's alleged DeepSeek was developed far more cost-effectively (millions vs billions) than OpenAI's ChatGPT (and similar large language models). If true (and we don't know) - this raises questions about the sustainability of current U.S. AI infrastructure investments - forecast to top $1 Trillion next year. All of a sudden - valuations for these AI stocks are being questioned.
NVDA: What Do You Pay for Growth?2024 will go down as another great year for stocks in the trader's almanack. However, what won't be recorded is just seven stocks comprised ~54% of the S&P 500 total gains (~24% with two trading days remaining). It's a bit like golf - you only need to record the final score - not how you did it. However, the how matters (not just the 'what'). This post will address the question of what to pay for one the most popular stocks today - Nvidia (NVDA). The asking price is $137 at 32x forward earnings. But does that represent great value given its growth assumptions?
It Wouldn’t be September Without a Few BumpsSeptember has started in a very typical September fashion. Down! It's traditionally the worst month of the year in terms of returns. But that's not a bad thing... As longer-term investors - it's great when things go on sale. That's when we get to sharpen our pencils on higher quality businesses. And for those who missed out four weeks ago (where you needed to act fast) - it's possible you will get another chance this month. As I wrote recently - the rapid 10% surge in equities over 4 weeks did not fill me with a lot of confidence...
Nvidia Beats Expectations… But Disappoints on GuidanceRarely has a single stock been so 'hyped' coming into earnings as Nvidia. The leading AI chip maker is widely seen as the 'AI' barometer... making their earnings more important than most. My expectation was they would handily beat Q2 revenue and earnings - however issue a softer-than-expected guide. It turns out that's what we got. Make no mistake - this was another exceptionally strong quarter. And despite the softer guide - "only" falling 6.4% should be considered a good result. This post talks about whether Nvidia is still worth a bet post their results. The answer is it depends on your timeframe... but long-term (3+ years) the answer is absolutely yes.
Smart Money Sells Big Tech… Invests in NKE & SBUXSomething I do four times a year is pore through something known as "13Fs". A 13F is a quarterly report that institutional investment managers with over $100 million in assets must file with the US Securities and Exchange Commission. And whilst these filings are submitted around 45 days after the quarter ends (e.g. August 15 deadline for June 30 quarter end) - they offer us insight into how the "smart money" is thinking about certain assets. Some names I follow include (not limited to) Warren Buffett, Bill Ackman, David Tepper, Howard Marks, Stan Druckenmiller and Seth Klarman. Now there was a consistent trend during Q2 - where large cap tech exposure was being reduced.
