In this market, long-term uncertainty is

so high that anything with short-term

certainty is trading at a huge premium.

Whenever you get heavy retail

involvement in any trade, uh that

usually

in my experience has meant that the

clock is ticking for the end of that

trade. There's been a maybe a disconnect

between the financial analysis of this

and the religious analysis that maybe

comes from the West Coast. There's going

to be a lot of pain, I think, if this

ever rolls over. And um uh I I just

don't think it's yet. Welcome to Other

People's Money. I'm Maxi and I'm joined

today by Jeff Keller, founder and

portfolio manager of Capeite Partners, a

technology sector focused hedge fund

that he's been running since 2021. Jeff,

thank you so much for joining me today.

>> Hey, thanks for having me, Max. Big fan

of yours. So glad to be here.

>> I I'm a fan of yours. I've been really

enjoying following along with Capeite

and everything that you've been doing.

There were a lot of tech focused hedge

funds that were birthed in 2021. a lot

of them sort of rode the the tech sector

up and then they rode it down in 2022.

And so I think, you know, just seeing

how well you navigated 2022 and the the

undulations that we've had in the tech

sector has been something that's been a

pleasure to watch and observe from the

outside. That's why I wanted to bring

you on today because it does feel like

since the start of Q3, we have had a bit

of shift. I actually ran the numbers as

of yesterday's close. Uh so since the

start of Q3 software and services are up

20%. Technology hardware and equipment

are basically flat but if you go down to

semiconductors and semiconductor

equipment we're down 7 and a half% to

start the quarter. Clearly a massive

divergence from what we saw to start

2026. So what are you seeing and maybe a

little bit about your background to give

us the perspective that you're coming at

from the tech sector.

>> My background is a little more

operational. Um, so I spent some time

actually working at Salesforce and

MongoDB. So a bit of a software

background and I think that maybe

orients me a little more towards the big

themes, a longer term horizon. Um, uh,

you know, looking for extreme

dislocations of markets. I think you had

in the beginning of this year an extreme

dislocation actually where the war in

Iran was distracting everyone from what

was just massively inlecting adoption of

AI. And that's been a longunning story,

but you really had the takeoff moment in

Q1. And you know, obvious Q2 was, you

know, I don't know that it was the

blowoff top for this trend, but you had

100% gain in socks. You had retail get

heavily involved. And so it's not

surprising that that trend has chopped

around a bit. And obviously, we had

situational awareness and deleveraging

in Korea. So I think some of this

volatility is, you know, it's certainly

obvious in hindsight. It's to be

expected. I think we're still moving

upwards on an S-curve with regards to AI

adoption. And you know, the bulls would

say, hey, Apple services is still

growing double digits today. Google

search is still growing double digits

today. Meta is growing in the 20s. And

so, um, you know, you could have 10 to

15 years of double- digit growth for

some of these AI labs. And, and, uh,

that'll lift all boats. So, I think the

volatility is to be expected. I think

software was thrown out with the

bathwater, obviously, and so some of

that bounce makes sense. But, you know,

if you zoom out, I don't think that late

June was the end of this mega trend. I

think this is just kind of normal

volatility. And so within software

obviously there was the big disruption

narrative and it's hard to say whether

that narrative has been disproven. I

mean if you take like the analog of

newspapers and how much the the market

was able to sus out the the pain the

newspapers were going to go through

before it actually showed up into

earnings. So if you are in the

disruption of software camp, um it's

really easy to to point to examples like

that and say, "Yeah, software looks

strong now. We we really haven't seen

the disruption, but but the results have

been extremely strong." And so when you

look at this rally, is it the market

saying that software actually isn't as

much at risk as maybe we felt at the

beginning of the year, or is it more

technical in nature? Because software

shorts were paired with a lot of these

AI longs. As much as the big

deleveraging event has happened,

degrossing is still happening across the

whole hedge fund complex.

>> It's been, you know, entertaining to see

socks and IGV basically have a negative

one correlation. Um, that does suggest

that there's there's clearly a technical

element to this that, you know, some bad

news for AI leads into it and service

now and and Salesforce stocks to go up

several percent. So that's an odd

dynamic. I think you split software kind

of into application software on the one

hand and sort of infra and cyber on the

other. Um you know I think the

application software obviously is still

under question. I think a lot of what

we've seen so far is just a

recalibration from that sector trading

at a premium to the rest of the market

um being double digit growth for a

decade now being maybe low double digit

or high single digit in some cases. And

once you get into that five to 15%

growth area, you know, it's really hard

to to to trade on revenue multiples and

non-GAAP EPS and and uh it's really hard

to dream the dream. So I think with um

you know the Salesforce workday,

obviously we've seen an acquisition

potentially of workday, but um I think

the initial sort of crash was kind of

coming back down to earth and it wasn't

actually pricing that AI was going to

disrupt the entire business. It was just

these are low to moderate growers with a

little bit left tail risk. So I I I

think that was somewhat rational.

They've bounced a little makes sense,

but you've really seen the balance in

cyber and infra. And I think part of

that is, you know, anything usage based,

any anything with the ability to

accelerate. I think in this market,

long-term uncertainty is is so high that

anything with short-term certainty is

trading at a huge premium. And so people

know that cyber numbers are going to be

good because people are rushing to to

build up their defenses with these new

AI threats. people know that infra can

accelerate because you see more software

adoption in general. You see, you know,

at least some portion flow into existing

tools. Uh you know, I I I don't want to

say I'm I'm bearish on that yet, but uh

those multiples have come a long way. Um

you're paying sort of 25 30 times

revenue for for large companies. Uh I

think that the the success rate on those

is paying up there is low. Obviously,

the next couple quarters are going to be

good. Um but you know, cyber is also not

immune from disruption threats. It's a

new paradigm. Uh, you know, you talk to

folks at some of the AI labs and they

think cyber is very much something that

they will disrupt as well. So, I think

that's TBD. I think it's a lot of uh

momentum and they're going to beat for a

little bit has driven them up. But, but

I think that's, you know, it's it's a

lofty territory that they're in more so

than AI, frankly. I'd argue that the

real AI winners are Crowd Strike and and

and some like that rather than maybe

some of the semis.

>> So, so within the the infrastructure, I

mean, what are you talking about? Can

you give me some examples of

infrastructure and why those names

haven't been under the same pressure as

application?

>> Yeah, I mean you look at a company like

MongoDB where I used to work so you know

I'm biased but um AI is clearly leading

to a proliferation of software. people

are creating either, you know, vibecoded

apps or they're just able to develop

more efficiently within large

organizations. And you know, every

software application has a database line

underneath it. A and and so when you

have an explosion of your end market,

that's going to lead to an explosion in

database software. And there's a

question of how are these databases

being selected? It's no longer human.

It's now, you know, various large

language models. So it's not clear how

the shift uh the mix shift works but I

think the the view is a rising tide may

lift that boat. You know that's an

example of Um obviously you know

you've seen some pick up with like CDNs

or the fastleys and and aim basically

anything that can deliver computing

resources that's driven on more compute

flows through to their numbers. I think

that they've seen some uplift and so

things that are usage based um certainly

in the short term you can see a pretty

quick spike. I think the long-term still

more under question but I think I think

infra there's a higher chance of beating

than there is in a Salesforce or you

know Wix or something that's a little

bit less likely to really blow up

numbers in the short term.

>> It sounds like you're not concerned so

much with market share, right? Like a

lot of times with these more mature

sectors, it's all about like who's

winning within the sector. And do you

think that within tech it it's less

about those types of bets and more about

where is the pie growing? Like is this a

relative a relative betting market where

you're really trying to pick winners

between these competitors or are you

just trying to see like where where is

the the wind at their backs? You know,

ultimately the work that I think one has

to do is bottoms up and company driven

and who the winners are. But I think in

technology a lot more money gets made

being in the correct major theme than it

does picking sort of within those

themes. You know, if you were 10 years

ago aware that cloud software was taking

share and there was a big migration to

the cloud, you know, certainly there

were certain names that were better to

buy, but for a while there it was more

importantly to be in the sector. Um, I

think that's what we've seen with AI and

you start to get dispersion, but early

on I think it's it's much more thematic.

It's much more sector driven and over

time as as the, you know, open-ended

growth story slows down, then it starts

to be about more dispersion. I think we

actually have a little bit of that with

AI where I mean it's still a pretty

open-ended growth story, but you've had

huge p the numbers now are sort of GDP

scale and so I think you're starting to

see a lot more dispersion where it does

matter who has more sustainability

rather than just this rising tide in the

short term is going to lift everyone.

>> Well, let's talk about that dispersion a

little bit. I'm sure obviously you have

this software background, but if you're

a tech focused investor, you've probably

have some exposure to some of these AI

themes. I mean post shakeout with what

you have seen from the market where do

you think investors should be within the

big AI trades I mean I also ran the

numbers on just the the uh S&P 11

sectors and you know technology uh came

in third. The only things that were

worse were industrials and utilities

which were really thrown into the AI

trade. So, you know, that has been the

lagard coming out of uh the bounce in

the market. So, where do you think if

people still want to be exposed to AI,

they should be looking?

>> I guess I'll start maybe with a

negative. I think one risk is to always

extrapolate a very short-term dynamic. I

think you're seeing a little bit of that

with, you know, the pricing of compute,

certainly maybe with Neoclouds.

Obviously, Elon is entering that space.

So, I do think that I think there's a

little bit of a risk that, you know,

this very short-term extremely high

price of compute is Elon might ex might

move us quicker to the glut. Um, so I

think that extrapolating that is a risk.

Um, you know, the other thing is it's

funny that of all these various, you

know, whether they're bottlenecks or or

semiconductor companies, they trade on

the same factor and they trade on

basically hyperscaler capex and the ARR

of the labs. like they they they need

the same underlying drivers and they

trade at hugely different multiples and

I think Gavin Baker's made this point

which makes sense. You know I actually

um you've got a lot of sort of behind

the meter you've got some some services

companies that are trading at pretty

high multiples on outyear numbers and

then frankly you have things like Nvidia

and Micron and the well well-known names

that are really not extrapolating. In

fact, they're telling you we're at peak.

And so, you know, maybe it's a little

contrarian, but I I I think it's likely

that the low multiple names across the

AI trade in general are going to do

better, even if they're at different

cycles of earnings growth. But it's all

driven by the same factor. There's

little micro cycles within each. But,

you know, I I I think that a lot of the

semis are not extrapolating as much as

some of the kind of more creative

whether it's behind the meter, some

services, highly cyclical businesses, uh

kind of hidden AI winners that people

have piled into. Those I think are

pricing in a rosier future than actually

a lot of semis.

>> And you know valuation is so different

as you said across this like how are you

thinking about what is or isn't cheap?

How far out are you looking that you

feel confident on earnings? Are you

valuing these things off of 27 28 um and

then you know between software hardware

right you're just talking about very

different multiples. How are you

thinking about valuation across tech

right now?

>> It's a good question. I mean, it's funny

to think about how many people, myself

included, you know, we'll talk about

four or five year projections and you

think back four or five years ago and

just completely different things we were

talking about five years ago is NFTTS

and spaxs and the metaverse and um and

AI was was was not on the radar. I think

there's a big risk with valuation. Um

I'm contradicting myself a little bit

earlier, but where a lot of these are

highly cyclical businesses, they're

obviously trading at maybe it's not peak

earnings, but massively inflated

earnings. You have a new profile

investor, you have a lot more growth

investors and tech investors. And so um

you know, multiple can be dangerous.

Even though I think that the multiple

there's some that have there's extreme

dispersion and there's some that are

very cheap. Um just relying on multiple

can be very dangerous because there's

high cyclicality here that a lot of tech

investors are not used to. But I think,

you know, if you have good visibility

into three years, you know, beyond that

is just hard to forecast in technology.

Again, you look back to five years ago,

very hard to very hard to predict what

we're doing now. And so, I think

there's, you know, if you've got

threeear visibility into into stocks and

valuation, you can do well. I think

there's a very high premium on one to

two quarters. I think that, you know,

that's a different game that I try to

play, but it's generally a two to

threeyear, you know, through cycle

earnings multiple with decent downside

protection.

>> Okay. But as as you said earlier, you

think there is a premium on that

certainty right now in in the coming

quarters. So as a portfolio manager, how

are you sort of bridging the fact that

you like to take a bit more of a

long-term view with knowing that the

market is really rewarding short-term

certainty and short-term growth.

>> That's the beauty of the long short

model is you can obviously you can bet

on both sides of the book. You can try

to isolate some of these factors. I

think that, you know, maybe it's

anecdotal, but I think that the time

horizons of people that I talked to is

probably shorter than I can remember.

Again, I haven't been doing this for 20

years, but, you know, I've never heard

sort of more conversations about what's

the catalyst path and, you know, who's

going to beat sellside consensus

numbers. And, you know, whenever you see

people that are that short term, I think

you can you can take a look a little bit

longer. I think it's, you know, it's

never as easy as simply this company's

going to beat earnings for the next

quarter, even though it works like that

sometimes. I think there's got to be a

longer thesis. So, you know, shorting is

a dangerous game. Um, you've got to have

awareness of of how far, you know, how

much people can extrapolate how juicy

some of these near-term imbalances can

get. But I think if you have, you know,

a couple a year or two of of horizon,

then you can sort of look at these and

say, "Okay, where are people

extrapolating and where can I sit and

wait?" And I think that's a pretty good

opportunity.

>> So, you're talking about that earnings

feedback loop, right? One of the other

interesting factors from earlier this

year that it felt different to me was

you had a feedback mechanism with a lot

of these partnerships deals. There were

catalysts really outside of earnings.

You know, one semiconductor company

would would make a deal with Nvidia and

the stock would would rip 10 20%. We're

still seeing those big sorts of deals,

right? somebody would announce, you

know, a huge bond offering to to fund

capex or or or some other sort of

buildout and,

you know, the the presumed receivers of

that of that capital would rally. We're

still seeing those sorts of

announcements, but we're not seeing that

feedback loop in terms of the market's

reaction. I mean, what is that telling

you that this feedback loop has really

dampened its effect? There's certainly a

lot more sobriety in the trade. I think

there's a lot of 1990s parallels.

Obviously, I was not investing at the

time, but it's funny to even compare it

to 2021. You know, the euphoria was

multiples higher in 2021 than it is now,

which is interesting because I think we

have a much more bankable long-term

technology trend. So, I think the

sobriety in a way is encouraging. I

think to your point about the lower

reactions to some of these

announcements, I think that there's a

lot of announcements where the economics

are unclear, especially think about with

data centers. You know, this company is

leasing from that company. You know, we

don't know who's on the hook for extra

costs. We don't know what happens if

there's a delay. And and so we've gone

through this phase where any association

with a year ago's OpenAI this first half

of this year, any associate association

with anthropic was gold. And I think

there's definitely a lot more scrutiny

to say, are you actually going to be

generating sustainable long-term profits

from this? Um I think you've seen that

with, you know, the crypto miners um

converting to data centers. Euphoria has

totally come off there because I think

there's concerns. So um

>> but now Bitcoin but now Bitcoin's

ripping and they're ripping along with

it, too. So they they get the best of

both worlds.

>> Yeah, exactly. They they they might have

to shut down the the data centers and

and uh go back to Bitcoin mining. No, I

think um I think you're right that there

there there's more sobriety. I I think

it's another point where it's actually

makes me a little more bullish. You'd

rather be in an environment where you

have to sit and earn the returns than

one where you get stocks moving 20 30%

on on press releases. So I think that

you know I think it's better to have a

longer slower cycle especially as a sort

of a manager of investments because it's

much easier to stay with things that

compound over time than it is with

stocks that go up 20 50% on press

releases. I I think it's also giving an

interesting picture into some of the

newer holders of these names, right? Um,

you know, if you go type in a ticker on

X, your favorite tech uh ticker that

just had one of these big announcements

and the stock hasn't moved, you're going

to see a lot of commentary from retail

sort of like cheering on the deal,

right? cheering on that deal and

wondering why why am I not getting the

20% pop that I got when this type of

deal was announced three to six months

ago. And so I I'm just wondering what

how you're thinking about the the holder

bases and the way things the the new

participants who have been coming into

this trade. One of the things you want

to be cautious of is whenever whenever

you get heavy retail involvement in any

trade that usually

in my experience has meant that the

clock is ticking for the end of that

trade. Now I'm not saying that I think

the AI trade is over but but you know

you saw it with you saw it with gold and

silver in the beginning of this year.

You've obviously seen it with crypto.

We saw it at one point with software

certainly in 2020 and 2021 when people

would be launching you know paid

newsletters writing about um MongoDB and

Elastic and and and all these companies

were it was it was you know um

>> Fastly

>> Fastly. Exactly. Yeah. Yeah. And so I I

think there's there's reason to be

cautious there. I think for sure that

you have these you know boring hardware

companies for 10 years that are now all

the rage among retail investors. I think

that's that's certainly dangerous. The

flip side is again this I think has a

lot more legs. It's got a lot more of an

open-ended growth story. You know, one

thing I've learned is shorting an

open-ended growth story can be deadly

because there's no catalyst. There's no

end to the story. You know, you might

get a data point that's helpful in your

direction being negative, but it's

really hard to put a nail in the coffin

on an open-ended growth story. And, you

know, AI is a good open-ended growth

story. I think it's a real one. um you

might have some hiccups, but in general

adoption is moving up the S-curve. We're

capex is going up. I think that's the

case for a number of years. And so I

think that's what differentiates this.

It makes me feel that, you know, this is

not uh this is not a 2022 environment.

It's not like June was the blowoff top

and we're going to be, you know,

semiconductors are going to be bleeding

for years. I think that this couple

months is a little bit more of an

information vacuum. People are latching

on to every ARR leak of anthropic or

open AI. I think that'll get clearer

when they become public. Um I I think I

think it's good. I think it's good to

clean out some of the leverage. I think

it's healthy in general. You know, I

don't know that we're going to rip to

alltime highs, but I certainly, you

know, I like short selling. I'm not

piling into shorting AI here.

>> We've made a few analogies back to 21.

You just talked about 22. You know, we

had this huge deleveraging event around

situational awareness in 21. it was

Archagos and it was a lot of the the

Kathy Wood arc names. To compare those

stocks and their businesses to what

we're seeing from AI is completely

disingenuous. So, let me just start by

saying the fundamental case for these AI

stocks compared to the speculative case

that was being made for a lot of those

names in 2021 is completely different.

With that being said, the market loves

to extract as much pain as it possibly

can. And that deleveraging event in 21

really did mark the top of the arc

names. The market continued to power

higher until inflation concerns really

started to take everything down besides

energy in 2022 and and we had that

rising rate environment. And so I just

wonder how you think about just the

technical factors that we're talking

about here and that you know as strong

as the open-ended case is that we could

still see a scenario where the market

moves higher a lot of these other themes

like software that are continuing to

have strong earnings. I mean so many

sectors are starting to participate in

the bull market. um like is there just a

little bit more pain to come for the

tourist semiconductor investor before we

start to see the market turn back to the

fundamentals?

>> I I think the 2021 analogy is

interesting. I might quibble with it in

a few a few areas. I think you're right

that it was sort of blowoff top retail

involvement and it took a while to get

through that pain. There's a lot of you

know ironic similarities to just

incredibly leveraged hedge funds driving

up a few of these stocks. I think you

know even in 2021 stocks like Tesla

software eventually kind of hit their

peak in late 21. So they they recovered

the the quoteunquote real businesses did

okay even if the spaxs and the GameStops

and and and whatever may have been sort

of cratered around uh Q1 of 21 as you

mentioned. So I ultimately I I do think

it was inflation higher rates that did a

lot of the damage in 2022 for the real

businesses and and we were coming from I

think arguably more indefensible

multiples back then 50 times revenue on

software when clearly software had gone

through a pandemic pull forward for for

you know cloud adoption. Um AI today

obviously there's some pull forward. I

think there's more legs to it. I think

the multiples are actually more

reasonable. Um, and so I think that

there's interesting analogies. I don't

think that this trade will break until

you start to see adoption slowing. I

think right now the reason the market

kind of gets nervous about ARR metrics

or whatever is that's the best indicator

we have is anthropic arai

open source whatever it may be. But as

long as in general the complex is seeing

more adoption, which it is right now and

it's explosive, um, you know, I I don't

think you want to short them. And are

they going to rip again? unclear, but I

think there's still a lot of open-ended

growth in this story. And so that's

where it's different, I think, than 21.

>> Now, it's another one of those sort of

rhyming but not matching perfectly.

Obviously, there is some debate about if

and when the Fed might hike rates. We're

probably going to get something, you

know, in the next few months, whether

it's the next meeting or not. The market

is pricing that in, you know, with near

certainty, but that by the end of of 26,

we're going to get something. But it's

not going to look like 22, right? We're

not going to come off the zero bound up

to the level of interest rates that we

saw. I mean, that was obviously a huge,

huge hiking cycle, but we're seeing

fiscal concerns come into play and

arguably those real businesses that were

hurt by rising interest rates are more

rate sensitive now than they were then.

We're we're seeing a lot of this

spending funded via the credit markets

to the point that that they've even

commented that it's crowding out the

Treasury market, the biggest market in

the world. And so I just wonder how you

feel about the rising long-end bond

yields and that you everybody seems

really focused on whether the Fed is

going to hike, but the market is

pushing, you know, financial tightening

much more so than than monetary policy

is. And do you have concern about the

ability for these companies to continue

to raise if we have rates at this level

at the long end of the curve?

>> It's definitely a concern. Far far

greater minds than than me have spent a

lot of time trying to, you know, figure

out which way the bond market's going to

go. So, I won't forecast what's going to

happen to rates. You know, certainly we

we've seen a number of kind of these

bond freakouts and rates go up and then

they come back down. Who knows if this

time's different. It's certainly

possible that two months from now, you

know, the 10 year is down 30 or 40 basis

points for whatever reason and you know,

we have less capital concerns than we do

right now. But for sure, when you look

at it now, I mean, this is a it's a

capital crunch in the sense that you're

talking about hundreds of billions,

pretty soon near trillions of what used

to be buybacks now actually going away

and also requiring debt issuance. You

know, my view is I I understand it's a

concern. This is a more dangerous way to

finance this buildout. I'm not that

worried about it, frankly. You know,

especially after the anthropic IPO,

these major the labs and and SpaceX and

Google will have raised about $500

billion year to date. And the markets

are fine. A lot more in debt as well, or

maybe not more, but a lot of debt as

well. And markets are broadly okay. I

think the cash these companies are still

growing top lines.

double digits, 20s for some. Frankly, I

think there's probably more cost base

they could take out if it ever got so

bad. You know, these are companies that

employ tens of thousands of people. They

did it in 2022. So, I think that there's

still enough room to fund the buildout.

I think capital markets are more

volatile and subject to euphoria and

fear. So, you don't want to go through

periods of the markets shutting down,

but I think they've generally been open.

The market's taken in stride so far. And

the other thing is the way that these

people that the Silicon Valley leaders

think about this is they view this as

existential. This is essentially the

greatest race of their career. This is

the pinnacle. You see Sergey and Larry

coming back to Google to work on this.

You see Elon basically pivoting all of

his attention to building data centers.

Um, you know, this is the big one. And

if they need to borrow at 150 bips

higher than they thought they did, and

it ends up in aggregate being whatever

that math is, big dollars, 1020 billion

dollars more a year, I don't think

that's going to slow them down. I think

there's been a maybe a disconnect

between the financial analysis of this

and the religious analysis that maybe

comes from the West Coast. And you know,

I grew up on the West Coast, so I like

to think I can do a little both. But,

you know, I don't think they're slowing

down. I think the credit markets might

try to slow them slow them down. But

unless we see yields really blowing out,

I think there'll be enough money to fund

it for a couple years. And if they're

wrong and you know the ROI never

materializes, we'll have a problem. But

I think their bet is in a couple years

it'll be obvious that this is a

transformative technology and so you

know a few extra bips of borrowing cost

is not going to slow us down.

>> Now what do you think about you know

obviously we we saw Google report its

first negative free cash flow quarter.

like is that coming for the rest of the

hyperscalers and and how do you think

markets are going to think about you

know the MAG 7 and the the the

hyperscaler names that you know have

they were the market leaders they are

definitively not the market leaders

right now like is that trade of just buy

the the big meggaap tech companies do

you think that's over um not to say that

they won't keep up with the market but

but that it's not going to be the the

easy trade to outperformance.

>> I think so. I mean, you know, I own some

of them. The stocks, I think, are

reasonably cheap. I think it's just a

very different profile than it was over

the number of years. You know, Amazon,

you can check me on this, but is

probably up something like 10x since

2016 or 2017. I mean, you made extreme

returns in owning the most well-known

companies in the world. Can you still

make 15 to 20% a year or or or whatever

it may be from here? Absolutely. But I

do think you're right that the profile

of return that people associate with

these companies I I think is is probably

behind us. I think also you know the

hyperscaler model which drove a lot of

the performance of the Mac 7. I mean

obviously not Apple and and not Meta but

but the other three were a lot of it was

cloud business. You know that market is

dramatically changed from basically

three vendors with you know thousands of

customers to now there's probably nine

or 10 scaled providers of of compute.

You include Oracle and SpaceX and and

and the labs who are procuring directly

and the Neoclouds and Core Core Weave

and Nebus at least. So you have a market

that went from maybe three to 10. They

still have scale advantages, but you

have fewer customers. So I understand

why those stocks are not trading at

higher multiples given their growth. Um

I think there's a lot more uncertainty.

there's more competition and you've got

a little bit of the law of large numbers

here just where you're talking about

again GDP level market caps and profits

and whatever. So to be able to get you

know two five 10x returns on those I

think that was a golden period over the

last 5 to seven years but I I think

you're right that that's over but

doesn't mean they can't still be good

riskrewards. It's just a different

profile. Now, I just pulled up Google's,

you know, adjusted free cash flow

estimates, you know, and looking at

annual numbers here, and it's like 27,

so it's like 18.8 billion in free cash

flow and then 28.5 positive free cash

flow in 28. I mean, does that presuppose

like too much certainty on the return on

this capex? Like, do you think that the

path to return on the spend is that

clear? in that immediate or are these

firms really betting on five 10 years

out that that growth that we said is is

really hard to predict it is I mean I

think there's a lot of focus on what's

the ROIC of this investment and there

there's obviously many opinions you know

the way I think about it is you know

it's almost like buying an option you

know it is existential if you don't play

this game and it wipes out your business

so you have to play so it's a defensive

option number one number two it's an

offensive option because you see it in

the cloud numbers. There's other other

ways that you can generate new products.

I mean there there's just sort of this

open-ended upside that maybe if we

become the leading provider of of

compute then whatever it may be there's

open-ended upside. So, it's really an

optionality thing. And I think the way

they've talked, I think Microsoft talked

about this in the latest call, maybe it

was one of the other hypers, but you

know, you can structure this where

you're buying powered, you're buying

powered shells, you're not filling it

with the chips yet. You're essentially

buying a couple years of optionality

where if you need to, you can ramp up a

lot of capacity really quickly. So, that

all makes sense to buy that option. Now,

if the ROI on that option is low but

positive, I think that's still a good

investment for them. You know, people

think about this as a concrete. You put

$1,000 into the ground, what are you

getting out of it? I think of it as you

got to put $1,000 into the ground

because if you don't, you might lose

your whole business. You got to put it

in because it might be this open-ended

upside. And I don't know if it's going

to pay you back 15. And frankly, I'm

okay actually. Shareholders might not

like it, but it's rational to do it even

at lower returns because the alternative

is is too risky. So, I think that has a

couple implications. One is we don't

know what the ROIC is, but I think

they're going to keep spending because

of this need to accumulate options.

Number two, it might not be great for

shareholders because if the ROIC is only

like four or 5%, that's not great. It's

kind of a waste of capital, but it's not

it's not incinerating capital. Um, but I

think the main takeaway is they're going

to keep spending because the risks to

stopping, I think, are much greater than

the optionality you buy by at least

continuing to stay in the game. So, I

think it's very hard to pin down the

ROIC. I think it's pretty good, you

know, which you can calculate in a

number of different ways, either through

numbers right now or just sort of

anecdotally about the profits that that

are flowing through the chain. Um, but I

think it's actually more driven by

basically the need to maintain

optionality than it is near-term ROI.

Going back to what you said about the

market is really rewarding short-term

certainty right now, you could argue

that the reason that the hyperscalers

have not participated is the uncertainty

around that ROIC. When I look at

estimates at least for, you know,

Google's free cash flows, you know, it

says to me that the the confidence

people have in those those free cash

flows turning around in 2028 seems to me

that that

they're willing to at least with a range

of outcomes say, "Hey, we're going to

start to get some return on this spend

two years out from now." But what if

2027 comes around and we're not getting

that visibility into 28 into this ROIC?

And it's not that it's negative. It's

not that it's going to be overwhelmingly

positive. We just don't really know yet

what the the return is going to be. Do

you think that that uncertainty is going

to cause continued problems for the

hyperscalers?

>> Yeah, I think it's a good question. I

think there is a world where to the

point earlier, you know, this used to be

a three horse business and now it's it's

eight, nine or 10. Um, you know, the ROI

where the profits flow in this chain is

not clear. you have anthropic and open

AAI building a lot of their own power

and data centers not enough but but

they're they're moving that direction so

I think that is why you know I remember

two years ago everyone was praying that

AWS would grow like 18%. And it's now

growing 40s and stocks incrementally

higher but not materially so given sort

of what we would have thought about a

40% growth two years ago. So I do think

that there is a decent amount of

queasiness on the ROI. I think there's

also queasiness on the sustainability of

growth because it's so concentrated in

customers. Um, so you've seen it where

meta meta is kind of on the ropes with

it. Um, I think the market and I think a

lot of people say the hyperscaler ROI is

still positive and Andy Jasse laid out

well and I think people are on board

with that for now, but you're right that

that can change quickly. I think

sometimes we overestimate how sensitive

these execs are to the stock price. Um,

again to the point of religious zeal,

like certainly they don't want their

stock price going down, but you know, it

it took a long time before in 2022

before Meta Meta started making cuts and

and that sort of thing. So, I think it's

got to be could they go down 10 20% and

everyone thinks it's a bare market for

sure. I don't know that that would cause

them to flinch. And is it going to is is

the ROI so bad that the stock would go

down more than that? I I don't think so.

I struggle to see the the stock market

forcing them to stop capex because in my

view the ROIC is good enough that the

stocks will never get so cheap that they

change course. But uh that is the

question.

>> I mean Zuck is a different animal when

it comes to his ability to withstand the

the share price pain. But I I do want to

open up the the can on Meta a little

bit. I mean there are so many bare

arguments for Meta. There was at the

point when they were sort of saying like

we're we're building out all of this

compute capacity. We're buying it up,

but we're not going to sell it. It it's

for our own uses. And they were really

being punished for that when they sort

of indicated that if they had overbought

that they would sell it out. The market

really rewarded them. And it has

perplexed me and it might go to the

short- termism that that you we're

seeing in markets, but I'm like if Mark

Zuckerberg can't figure out what to do

with the compute that seems to me to be

just like a bare case for AI technology

in general. I mean, what do you think

about this this bare argument for for

meta that they haven't defined so much

what all of this compute is going to be

used for?

>> I do think it would be a little

shortsighted of them to rent out the

excess compute. I think the reason they

made this messaging is they want the

market to give them rope and so they

need to signal like look we understand

your concerns and we will stop or re

release the capacity we have if need be.

Now if you do one of these threemonth

contracts you can earn a couple billion

dollars in profits and that would be

helpful to Meta but it's much more about

the signaling to investors than people

on a trillion dollar plus company

getting excited about you know one year

supply demand on a portion of your

capacity. So, I don't think it's going

to move the needle for the business. I

think it's more almost telling

investors, look, we get it and we will

stop if need be. We will release our

capacity if need be. Um, I I I might

disagree a little bit that, you know,

Meta, they've had a lot of internal

dynamics, hiring a new team. You know,

they were originally open source focus.

They've bounced around a lot. I think in

general, there's always winners and

losers within the AI uh the foundational

models. I think as long as the aggregate

is making progress, that's more relevant

to the broader AI trade. I think that's

still the case. I think meta has, you

know, more of its issues. I think

Zuckerberg, you know, there's a great

quote in in Sebastian Malby's book on on

Demisabus about basically him asking

Zuckerberg about AI as well as various

other tech trends. And Zuckerberg was

equally enthusiastic about AI and crypto

and and NFTTS and all this stuff. and

Zuckerberg far richer than I am, far

more successful, but he has a tendency

to, you know, go big on tech trends that

it's not really obvious that he needs to

do that for the core business. I think

as a shareholder, you have to be you

have to believe in him for that. I think

that's just a tough that's a it's a it's

a more binary question as a shareholder.

It's it's not it's not one I can

underwrite. Um, and so but I also don't

think that their troubles are

necessarily reflective of broader AI

troubles. Well, to me, I'm just saying

like it's funny the people who are super

bullish on AI, right? But then they're

bearish on Meta because Meta doesn't

have a plan. I'm like, well, there

really isn't a plan at the corporate

level for a lot of companies. And if you

talk to the teams that are sort of

trying out AI, I mean, it's difficult.

It's difficult to to go to senior

management and say, "Yeah, we want to

bring on this technology that the bull

case is we all get fired, right?" like

the the actual adoption at the corporate

level, how that's going to look is still

a huge concern. And so I just don't see

how you could hold both views in your

head at the same time that you're like,

I'm super bullish on AI. It's going to

change the way that that we work.

Compute is going to be the new oil, but

at the same time, like Zuck is

overbuilding or over, you know, like

>> it's a good point. Um, I think that is

Zuckerberg's view as well, which is

basically, you know, hey, we're

believers in AI. We're building this

compute. Don't worry about it because we

can we can sub lease it. We can do

whatever we need to do. Again, to the

point about sort of acquiring

optionality. It's not totally irrational

for them to do. I actually think it's

actually quite rational. They're the

biggest spender. They're relatively the

biggest spender. They get the most

questions. But, um, I understand his

concept of like this is existential to

my business. It might be huge upside.

It's not obvious yet. I need to keep

playing the game and I need my investors

to give me rope. And so I need to tell

those investors, look, I'm I'm playing

this game and I will back off if need

to, but I'm not backing off yet. I think

that's actually a rational strategy even

though public markets will whip your

stock around.

>> Well, I I want to shift a little bit

from from the analysis of of the facts

right now to to what it means for for

you as an investor, as a portfolio

manager. So, you know, you have the

ability to go long and short. What does

the the book look like right now? I know

that you are very focused on the micro

and the individual companies. We have to

stay away from that a little bit, but in

terms of the the places where you're

you're carrying a bit more exposure to

these themes and the places where you're

you're sort of betting against them.

>> You want to be in the big themes. I

think I have a little of a contrarian

streak. You know, there's a lot of

headwinds about um the politics around

data centers. I think in general that is

an overstated concern. I understand why

there's concern. I understand why these

people are upset about data centers

midterms are coming around. I think

there's, you know, there's a lot of

stocks that are basically implying that

data center starts are going to be

challenged. Whether that's labor,

whether that's some of these some of the

sites that that are actually applying

for power. I think that that is

unlikely. I think that's probably short

term. I think that you look past the

midterms, whether certain states are

going to sort of put moratoriums in

place or not, they're I think they're

going to get built. we've seen various

technology moral panics over time and

usually the market is strong enough. So

I think that's one area where I'm

looking at things that are uh uh pricing

in a deceleration and data center

starts. I think there's actually some

legs there. Um you know I I I'm always

wary of extrapolation. I think you know

anywhere that there's high near-term

certainty I'm I'm looking a little more

contrarian and saying you know

eventually you come on the back slope of

those of those little mini cycles and

extrapolations. So I think data center

starts look good. I think there's a lot

of idiosyncratic growth stories that

have been kind of left for dead. You

know, things like e-commerce, some

recent IPOs. I mean, nobody's talking

about those anymore. It's all I

software. Is software dead? Is it not?

So, I think that there are kind of some

independent stories, growth oriented,

stand on their own legs that are that

are pretty compelling because, you know,

they used to be bit up to high multiples

and I think they're not as attractive

given there's other exciting areas.

>> Now, you know, a bit about just your

philosophy on the portfolio, right? So

you said you want to have these themes.

Your long short, right? Long short means

a lot of different things. It can mean

anything from like market neutral to

there are people out there who are

running essentially like 100% net long

calling themselves long short and it's

really more of a an enhanced long

portfolio. What does it look like for

you? What are your typical nets and and

how much can that swing around because I

think it can help us understand how you

feel about the environment. I refer to

the fund as long biased which I count as

having sort of more than 50% net

exposure can obviously be higher than

that as well. You know I think that

there's so much money one of the more

sort of common market debates these days

is uh is the influence of of pod shops

and momentum shops or whatever it is. I

there's clearly a lot of money that is

market neutral that is relative

valuation focused. I think that there's

uh a lot of opportunity and not being

constrained in that way. I like being

long biased because markets go up over

time. Capturing beta, you don't want to

get paid for it, but you want to be able

to capture it for your investors. So, I

think that a long bias model with more

duration that is not subject to, you

know, having to be perfectly factor

balanced is a is a pretty attractive

model. I think it's probably always been

the case, but when you have more and

more money that's that's got to be, you

know, quarter to quarter that's got to

be factor balanced or factor aware or

has to de delever at the wrong time,

maybe it was July or whatever it may be.

I think that the kind of old school

longshore model is probably in for a

renaissance. Um I I think that there,

you know, there's reasons why it's tough

to do that business. Uh people don't

want to pay for it. You know, people

want either a cheap long only or a high

fee um market neutral shop. And so I

think that creates an opportunity where

kind of the old school stock picking um

can actually outperform.

>> I alluded to it a little bit like you

did very very well in 22. So many tech

investors got so excited in 2021 and and

got carried out, you know, rode their

names down all the way. Some of them

have very publicly come back from the

ashes and, you know, legendary comebacks

and and hats off to them. Um but but

many people didn't. For every for every

uh Cliff Sawson who who made it out and

back, there was somebody else who got

carried out um probably times three. And

so I'm just interested in like are you

ever going like fully net short and what

does it the environment have to look

like for you to get that bearish on tech

and and and and what would you want to

see from the current environment to to

really start to make you concerned?

because despite the uncertainty, you're

still pretty bullish on this trend.

>> It's unlikely I would ever get net

short. You know, I think I think late

2021 was a once in 10 or 15 year

environment where you had basically all

the factors of incredible government

support, significant retail involvement,

clear cyclicality

with with COVID and and and pandemic

beneficiaries in secular industries. So,

you had just you a lot of reasons to be

incrementally bearish. Uh I think that

multitude of factors rarely exists. I

think markets move faster now. So it's

very possible that we get one more

regularly. Now I think the AI trade

eventually has those ingredients. You

know huge huge change in underlying

business activity to do this AI uh

buildout. A lot of investor enthusiasm.

People are talking about you know

obviously curing cancer and and money

will be obsolete and and and whatever it

may be and a lot of cyclicality in in an

investor base that's used to secular

growth. So the ingredients are there. Um

I think the things that are most

important are number one uh basically

the the lab ARS. In other words, the

adoption the S-curve which I don't think

there's any crack in there yet. Number

two is the capex. You know there's

concerns it's not going to grow at the

rates it has forever but um you know if

it levels off at pretty high rates a lot

of these stocks will do well and and

right now it seems like growth is is

still strong. capital markets are still,

you know, they're tightening, but still

provided hundreds of billions of dollars

this year for infrastructure. So, I'm

not worried about the capital markets

stopping it. And then the third thing

that's that's relevant is, you know, the

price of compute basically. And I think

that will signal if we're in an

overbuild, which which would be

problematic. So, I don't think we're

there. I think the AR is strong. I think

the capex is strong. And the price of

compute, the time it takes to build data

centers is not suggesting we're at a

glut yet, even though Elon might might

move that a lot. So, those are the

things I'm looking at. I don't see it

yet, but I do think that if and when

this cracks, you know, it would be

helpful to have a short selling skill

because there's a lot of people in

highly cyclical businesses trading peak

on peak and even probably some stocks

that I own. So, there's going to be a

lot of pain, I think, if this ever rolls

over. And I I just don't think it's yet.

>> The thing that has me most concerned is

is actually somewhat the AI tools that

that are available to a lot of investors

and the echo chamber. And look, whether

it's financial Twitter now X or it was

the chat rooms back in the 90s where

people were sharing stocks with each

other, you now have like a true echo

chamber where you're talking to an AI

chatbot. And there is so much happening

at the technology level. And so people

are doing a lot of fundamental work, a

lot of work trying to understand the the

differences between these companies and

where they sit in the supply chain. And

it's really easy to have a strong almost

feels like bulletproof fundamental

thesis and you can take that and you can

put it into an LLM and you can say sense

check this and they can go you know Jeff

that is a really smart thesis but

sometimes like the market doesn't really

care about that like it it feels good

the fundamental focus that people have

right now but it the market doesn't

always care.

>> I think you're right. I mean, the amount

of AI generated content that I've seen,

whether it's, you know, in sellside

research or or substacks or even just

investor chatter is surprising to me

because, you know, the whole job is you

got to come up with your own thoughts.

And I think that it's very easy to get

standard consensus thoughts, but I'm not

really sure those are those are of

value. And so, I think AI is great for

ramping up. It's great for facts and

figures, but you know, I I agree with

you that it can create an echo chamber.

I mean, I think there's also a huge

behavioral opportunity in fund

management. I mean, you just think

about, you know, think about how

addicted we all are to our phones. Think

about how quickly these narratives spin

up in politics or stocks or whatever it

may be. Um, think about everyone's

attention spans. So, I do think that I

don't think AI helps with any of that. I

think AI probably enables a lot of

shortcuts. It enables a lot more

confidence. I think that it's going to

create a lot more behavioral

inefficiency. I heard on another podcast

that somebody was saying, you know, I

think that if AI gets advanced, it's

basically going to remove kind of fear

and greed from markets because, you

know, the AIs don't suffer from fear and

greed. They can be sort of perfectly

rational. And I basically completely

disagree. Like I think that um I think

you're going to get faster narrative

cycles. I think you're going to get more

crowded narrative cycles. I think that's

in addition to the phones and terminally

online nature of our society. So I think

that there's a an emerging behavioral

inefficiency. I think markets probably

getting less efficient over time and I

don't think AI really helps with that.

Actually, I think it might for

quantitative models, but I think it's

much less likely to lead to inefficiency

and more likely to lead to

overconfidence.

>> Yeah, you're saying to efficiency, you

said not to lead to inefficiency. More

likely to lead to inefficiency than

efficiency.

>> Yeah, that yes, thanks for catching

that.

>> I just wanted to clarify. But uh to your

point about the speed and I mean it's

something that right like the faction

you talk about being factor aware and

you're like there's a there's an

advantage for fund managers you don't

have to be overly factor aware but it

does seem like it is a requirement to at

least know what your factors are. That

doesn't mean you know you can you can

believe it's an advantage for you as a

portfolio manager to knowingly take on

more factor exposure than somebody whose

job it is is to minimize that factor

exposure as much as possible. But it

doesn't mean you can't be unaware of the

factor exposures that you have. And I I

think the speed at which things are

being bucketed, factorized, and ceasing

to be idiosyncratic company level alpha

and becoming a bucket or a theme or a

trend is is happening extremely fast. I

mean, how do you as somebody who likes

to underwrite but do bottom up work kind

of sense check yourself and make sure

that you're not letting the strong

fundamentals that you're seeing cloud

the fact that it's part of a theme that

is extremely hot right now and that

means a lot of the money that's coming

in is is not doing the work that you're

doing.

>> I think you certainly have to be aware.

I think it's you know I I I've spent a

lot more time in the last year or two

trying to be aware of factor uh

exposures. It's not even something I

was, you know, paying attention to

probably four years ago. So, I don't

know if that's just my awareness or the

markets are changing. Um, you know, I

think it's ultimately a time horizon

question and I think it's it's an LP

management question. You know, if if um

there's certainly a you know, there's a

standard in the business that you sort

of report monthly results and monthly

results is completely insignificant in

the scale of time. quarters are probably

insignificant and so it's kind of just a

a you know a noise generator especially

given how much factors move you know if

you were a software investor you know

you had LPs saying what what's what's

wrong with your your process why are we

losing so much money and the reality was

it might have been that AI funds were

levering up and you know shorting

software and and driving negative

momentum into your stock and it's a it

was a two-month thing and those stocks

have roundt tripped over four months so

I think you have to be factor aware I

think you got to manage your LPS I think

you need to make sure that if you're if

you're making factor bets or you have

sector bets or whatever that you're very

well aware of that and that you're

conscious about that. But I also think

it creates a longerterm opportunity

where you can say look clearly momentum

is having whatever it is one of its

worst five day stretches in in 20 years.

Okay, let's let's take a look at that.

One of the things I like to go to is

extremes. You know, when you have a wash

out in a sector, you have people saying

something's uninvestable. you have, hey,

this is the largest, you know, hedge

fund shorting day that we've seen in in

seven years. Okay, pay attention to

that. Those are the types of signals

that I think give a lot more

opportunity. It seems like a new world.

I'm sure there's always been parts of

that. I certainly wasn't paying

attention to it as much as I am now. So,

>> and so, you know, what did you do?

Obviously, we all had to go through

that, right? in July. I doubt there's

anybody listening to this podcast who

didn't have at least one AI stock in

their portfolio that was going down

every day despite really no news about

that particular company. I mean, you as

a as a professional investor when that's

happening to you, what are you doing to

sort of like sense check your book?

because I I don't think July is going to

be the last time in this cycle that

something like that is happening and and

you we're all left, you know, wondering

like what why is this happening,

>> right? Yeah. I mean, there there's kind

of a life cycle of at first you think,

oh, this is great. My stock's down. I

can buy more. And then there's a second

where you start to get a little worried.

And then there's a third where you say,

okay, there's maybe bigger factors at

play. And that's kind of when I think

people started hearing about the margin

calls and situational awareness and it

made a little more sense. An example

there is a lot of their pain was

concentrated in Asia, especially Korea.

Um, you saw some notable percentage of

of the Korean population getting margin

calls. Who knows if that's kind of

rumor, but you you saw a lot of margin

calls, a lot of leverage in Korea, huge

deleveraging. Um, that's something that

that perks my ears up. you have huge

hedge fund deleveraging, huge retail

deleveraging in a secular trend that I

actually think is is still going pretty

well for the basically two large

companies in that country. So that's one

where once once you sort of have all the

pieces in place and you can see what's

going on, you say, "Look, I want to be a

buyer when people are getting margin

called and liquidated." So that's one

where maybe I think the picture is

improved. Um but but otherwise, you

know, it's it can be hard to sus out

what whether it's fundamentals or

technicals. So, I think you have to

really see a lot of signals like I think

we saw in Korea to say, "Okay, this is

maybe just even from a short-term

trading perspective, a much more

attractive proposition."

>> And is that the type of thing where you

are keeping some level of cash on the

sidelines for these events where you're

willing to flex up your leverage a

little bit when you have that confidence

as a portfolio manager? Like, how do you

like to maintain the ability to step in

when you have that level of confidence?

Yeah, I mean I think I've talked about

optionality before, but I think

optionality is generally one of the most

important things when when managing a

portfolio and that can be cash, that can

be lower gross exposure, but being able

to move such that you're not the one

deleveraging or maxed out when there's

an opportunity. I think that's

especially more so in these markets

where it seems like there's again these

sort of three, you know, three standard

deviation events or once in once in a

20-year event seem to be happening every

several months. I like to run with a

little bit more flexibility. I like to

be able to step in once there's a little

more pain. I'd say in general, my time

horizon is a little longer. I'm trying

not to trade too much. I'm trying to

wait until something hits me in the

face. I think we had a little bit of

that in July uh with with sort of as I

mentioned, but it's hard to say. And I

think that uh uh you know, there's a

graveyard of folks that try to trade

short-term moves. So, that's why I'm I'm

really trying to see something that's

three standard deviations, four standard

deviations really stands out to me. and

then you can move and keeping that

optionality open, you know, uh this job

it's like we we all spend all of our

days looking at models and companies and

reading and all this stuff. Um but you

make your money on one or two good ideas

a year, a couple big ideas every couple

years. And so making sure you have the

optionality for that, I think is more

paramount than, you know, making sure

you've got, you know, great stocks maxed

out at all times.

>> Yeah. I mean, and look, obviously the V

has come down quite a bit, but I just

like pulled up like EWY and Socks V. I

mean, they're realizing

uh 73 V and EWY the one month look back

and and socks is 55, you know, they

peaked out at like 185. It's like how

much leverage do you need for sectors

that are realizing that level of

volatility?

>> Right. Right. Yeah. I'd say in general I

I've learned that I comparatively I run

with very low leverage. I didn't realize

some of these folks are running with as

much. I agree with you because I think

you know leverage is a great way to

reduce optionality. I I I think it's

interesting the realiz I mean usually

one of the most basic indicators you can

see for how markets are feeling is just

the VIX and you can tell how much people

are panicking and and paying for

protection. This market has been

different because there's such

dispersion within sectors and even

within stocks that you know the markets

are very tranquil. The headline indices

are very tranquil and you're actually

seeing these incredible ball spikes and

in in certain sectors or to your point

EWI or stocks which you know it's like a

duck kicking below a surface but if you

go below the surface this year's had a

lot of volatility and a lot of rotations

and a lot of opportunity to be nimble at

extremes. You know, my guess is frankly

it's it seems like one of those trends

that's going to increase. It seems like

there's probably only sort of shorter

time horizons, more uncertainty, more

money flowing into, you know, less

fundamental strategies. So, my guess is

that that will increase and sort of the

behavioral advantages will increase.

>> Well, look, I I want to talk about

what's what's coming up next and and

close out. We've got um pretty much with

the exception of Nvidia at the time that

we record this, they haven't reported.

I'm not going to ask you for any

predictions on Nvidia earnings or

anything like that, but we're kind of

through the meat of earnings season by

and large. We have a little bit of Fed

uncertainty, geopolitical uncertainty

that people are concerned about,

obviously what's happening in the bond

market, but what are the factors that

you're going to be paying most attention

to, you know, as we close out 2026?

>> Yeah, I mean, I think we'll get the

anthropic S1 probably, it sounds like

next week or or the week after. Um, I

think that's going to be, you know, I

don't know that we'll get a ton of new

information that we don't really already

know. We might get a little more

precision, but my guess is the numbers

are broadly leaked, but I think that

those companies coming public will be

hugely helpful and that we just have

metrics and we're not sort of guessing

and and trying to hear third-hand. But I

I think the most important things are,

especially for the AI trade, it's a it's

ARR of the labs and open source, some

form of adoption of AR. Number two, it's

capex, which, you know, seems pretty

locked to be strong for 27 and people

start looking at 28. Uh, but but you

know, I think if anything, people are

feeling better about the hyperscalers

than they were in the first half. So,

that seems to be strong. And then number

three is probably the forward prices of

compute, which very tight right now,

probably tight for a while. Uh, I I

think if if if you're going to see an

overbuild in data centers, you'll see it

there. Those three I think I think are,

you know, broadly strong right now. You

know, what will what will the stocks do?

It would not surprise me if we chop

around for a while. I think you had a

lot of retail enthusiasm, a lot of

investor enthusiasm in June. Usually,

you don't see those things rip back to

new highs. I think that we're sort of

waiting for the next breakthrough or

acceleration. It wouldn't surprise me if

we get one. I don't know what it is, but

there's recursive self-improvement is

kind of floating out there. So, we could

have some technology breakthroughs that

get people excited again, but it would

not surprise me if we chop for a bit.

But, I think having the labs public will

help with some of this narrative

volatility. Uh, so I'm excited for that.

One follow-up question to that before I

let you go. Do you think that there will

be any sort of like capital vacuum that

comes from that? We saw it with space,

right? Again, not quite the same

fundamental business quality that we're

talking about in many of these AI themes

that people are investing in where

there's already like strong earnings,

but you know, you had all these also

rans in space really have the win taken

out of their sales. they had been doing

incredibly well and the second people

could buy SpaceX, they sold a lot of

those other space names to go put it

into SpaceX. You know, we don't have a

pure play lab, right? Like anthropic.

Obviously, if you're buying Google,

you're getting the whole Google

business. If you're buying these

semiconductor companies, yes, it's

directly tied to to the AI theme, but

you don't have really AI AI model

exposure available on the public markets

in a pure play. I mean, do you have any

concerns about certain pockets of the AI

trade having a SpaceX effect?

>> I think it's possible. I I don't I don't

have a ton of concern. You know, I think

that, you know, equity issuance is a

huge signal for kind of euphoria and and

and blowoff tops. I think it is

different when the equity issuance is

into kind of more real businesses. Now,

I would certainly quibble with the

SpaceX valuation, but in general, these

are these are not dollars going into I'm

trying to think of some of the

highlights from from Spaxs or whatever

it is. So, I I think that equity

issuance into realistic businesses at

realistic prices is less capital sucking

than you know, we need to put $10

billion into Nickeola or whatever we

were doing back in 2021. So, I think

there's some worry. you know, the space

stocks, they they sort of they were at

they they doubled and then got cut in

half. So, they're kind of back to where

they were. Could the AI stocks run up

into the anthropic IPO and then come

back down for sure, but I I think that,

you know, the the euphoria and the

optimism and the positioning has kind of

cleaned out in the semi-rade. I don't

know that means it's going to rip, but I

I think that I think the market's ready

to digest, you know, anthropic, and I

think it'll want lab exposure. Frankly,

I think I think it's going to trade in

at a crazy price. You know, I'm not

saying I'll buy it, but I I think that

there's going to be a lot of enthusiasm

for it.

>> All right. Well, Jeeoff, we will leave

it right there. Where can people find

you out on the internet these days?

>> Uh, I'm on Twitter, Jeff Keller1. Um,

and then always on email, JeffLlight.co.

I didn't pay for the com, so it's just

the do.co.

>> Nobody's paying for the com anymore. All

right, Jeff. Thank you so much. We'll do

it again soon.

>> Great. Thanks, Max. Appreciate it.