Peter Garnry, CFA

I find it mind boggling that so few investors are talking or reflecting on this. One this is circular vendor financing, but outright cross ownership made casually between a growing group of US technology companies is bad for competition over time and amplifies financial risks one day.

The US Keiretsu continues.

Unfortunately quite predictable and something I have written about more than a year ago. When you increase CapEx margin will go down in the future unless OpEx is cut. These companies are transforming into capital intensive low employee to revenue companies.

I guess it is not a big surprise. The domains where LLMs make a big difference are not people intense relative to the economy. I remain of the view that the productivity gains will come from physical AI and research breakthroughs. Hassabis’ direction is a good indication of this.

The fact that profit margin is only going up in technology sector is a sign of circular revenue and business flow among n companies in the technology sector. Productivity (revenue per worker) looks depressing and especially if you adjust for inflation.

Reflecting that investors are realising ROIC will decline as the depreciation wave hits and CapEx slows leading to lower revenue growth and lower operating margins.

It all started with the Google IPO allowing poor governance to fester. Because Google was so successful, Silicon Valley could sell the benevolent unconstrained founder story to Wall Street ever since.

When everyone speeds up with AI, differentiation will come from going deliberately slower. Excessive development speed and change due to AI could become like a volatility drag on companies lowering your long term growth. Counter intuitive to the wisdom of Silicon Valley.

One of the more important charts on equities right now. Given the depreciation lag incremental ROIC is much lower and given they are all not going to be winners one of them will potentially destroy a lot of value.

Really important point and key risk to understand. Although this was also one of the key risks to social media spending but as long as the VC ecosystem has positive momentum it can continue for a long time…

Red flag 🚩 on the board of directors at Ralph Lauren. This incentive structure is obviously wrong. It’s like setting up a bonus structure only on new sales without taking gross margin into account. Guess what will happen?

Essentially the AI deflation wave Paul Kedrosky has been talking about all year…

Very happy user…has never for a second regretted leaving Chrome behind.

Agree that it distorts incentives but ads are a necessary “tax” for those that want things for “free”.

Annual revisions lifted the savings rate level, but the sharp downward trajectory remains. Despite all the noise about AI, the biggest driver of strong US growth over the last 2.5yrs has come from household's spending growing much faster than their incomes.

Incredible downfall for Nike. The most outrageous thing is that it could much more given the bleak sales outlook. The ultimate test of brand strength…

Breathtaking footage

The real Muse is legendary 👌

Search interest in “Muse” was still higher in September 2009 than it is now (That’s when the band Muse released its amazing “Resistance” album)

The AI token deflation wave is the largest ever since in the modern economy. Some will survive this but the ROIC economics will be tough to manage. It will require an insane operational cost focus. Completely opposite modus operandi of the past for hyperscalers.

Google search is dying. The question is how long it will take. And more importantly, can Google offset search revenue with YouTube, cloud and AI?

Meta’s Muse is interesting but is it a most. That is the market’s current verdict but Amazon’s rejection says that the path is complicated. Interesting point sequence: Claude Code - software Mythos - cybersecurity Muse - banks The first narrative has often been wrong. Could happen again…

I love when investors talk about this era is exponential across so many dimensions. Sorry to break the party. The economy has always been exponential. What they actually mean is super exponential but the physical world will destroy that dream before it even starts…

From looking at data from OpenRouter, Ramp & Vercel, we can see the AI business model in real time. Anthropic remains the monetization leader, but revenue growth is slowing as customers shift to cheaper models. OpenAI is going the other direction, with usage and spend on its models accelerating.

Of course this is the strategy. Any rational person should see this and not believe this extinction nonsense. The paradox is that Trump flips the narrative on the call with Jensen saying it a hoax. My take is that it is all about a giant political battle shaping up…

Extremely valid point and likely something that could be extended to other domains in our new geopolitical era.

Last time the Fed hiked before an election? 2022 midterm under Biden. From 1984 to 2024, the Fed adjusted rates (up or down) within 60 days of an election (43%) as often as in any other 60-day period (45%).

The best joke today 🤣