Investment Writings

Advances in pretrained foundation models, synthetic data generation, and massive inference compute have created a compounding flywheel of improvement. The pace of acceleration at a triple exponential is incomprehensible. The trajectory of GenAI is such that the next decade could seemore technological progress than the last several decades combined. Large Language Models have led to Large Reasoning Models which are leading us into the Agentic AI and Physical AI Era. Not only are GenAI capabilities accelerating, but the costs of deploying these models are plummeting as efficiencies increase. This lowers...

While much attention has focused on model training and discussions of “Stargate” data centers, inference workloads are poised to take center stage. About six months ago, LLMs faced criticism for “hallucinations” and their lack of Type 2 thinking—their inability to think critically and reliance on “one-shot” responses. With the recent ChatGPT Strawberry and o1 releases, however, a new picture is emerging. This shift is due to increased inferencing compute. Rather than providing rapid, one-step responses...

The rise of Generative AI has ushered in a new era: the mass production of intelligence. Intelligence, unlike the products of previous general-purpose technologies, has unlimited demand. Intelligence drives innovation and efficiency. Chat GPT was the big bang of Generative AI. Within two months, it had 100 million users, making it the fastest growing application in history. VC Investments in Gen AI have increased by almost 400% in 2023, reaching almost $30B. Gen AI and LLMs are in the lexicon of almost every management team today.  The appetite for Generative AI-driven workloads, such as large language ...

Traditionally, Data Centers have gone unnoticed, humming in the global background powering things such as Google's searches and Netflix streaming videos. However recently, data centers have taken the front seat due to Generative AI Revolution and advances in High Performance Computing. Jensen Huang, CEO and founder of Nvidia, forecasts that within the next four years, expenditures on data center equipment for AI workloads will reach an estimated $1 trillion.With the tsunami of AI demand for compute and storage, the data center industry faces a pivotal challenge. The vast majority of existing data centers are structured around CPU-based servers, which are..

Berkshire Hathaway, under the leadership of Warren Buffett since 1965, has traditionally relied on two primary value drivers: a substantial investment portfolio (now ~380 billion in size) known for its market-beating returns and a collection wholly-owned businesses (subsidiaries). Historically, Berkshire's stock consistently outperformed the S&P 500; however, since around 2008, the S&P has slightly outperformed Berkshire's stock. Berkshire Hathaway should officially de-emphasize the importance of its investment portfolio by selling down positions to reduce concentration, greatly increase diversification ...

Semiconductors. The oil of the 21st century.  In 2022 more than 1 trillion microchips were manufactured, roughly 130 chips for every person on earth. Semiconductors have taken the front seat as supply chain issues brought industries to a standstill in 2021, geopolitical tensions have increased, and AI has hit an inflection point. Although the US makes up a large part of semiconductor demand, China became the largest user of semiconductors in 2021, buying chips to the tune of $190+ Billion. Although the US still dominates in the design and equipment segments, its manufacturing capacity market share has decreased ....

We want to address a problem that has gone largely unacknowledged in capital markets conversations: The widespread prevalence of buybacks and their potential to erode ongoing shareholder value. It is almost universally accepted that buybacks are a way of “returning value to shareholders.” While intelligent buyback strategies do indeed benefit ongoing shareholders, poor buyback strategies are far more common and have the opposite effect. They destroy shareholder value. This predicament arises because most management teams lack a systematic approach to assess the true value of their company's stock...

Since its inception in 1913, the Federal Reserve has had the ultimate responsibility of functioning as a Lender of Last Resort (LOLR). Since then, this LOLR function, along with the rest of the Fed's toolkit, has undergone a quantum leap in evolution (see conceptual illustration below). Furthermore, functions that have traditionally not been associated with the Fed, like Buyer of Last Resort (BOLR), have been implemented but to our knowledge practical attempts to educate market participants on the differences between the two has been lacking...

What is corporate governance? How does one discern good corporate governance from bad? Why should an investor even care about governance? Corporate governance is the checks and balances that attempt to enable ethical behavior, proper decision-making, and accountability; Management is accountable to the board, and the board is accountable to shareholders. Good corporate governance incents managers to act as responsible owners of the company, taking a long-term view of the business and threading the tension between using capital for the business versus distributing it back to shareholders. As passive...