Aschenbrenner’s departure from OpenAI in early 2024, reportedly after raising safety concerns, freed him to share his unvarnished perspective. In June 2024, he published a 165-page manifesto titled Situational Awareness: The Decade Ahead. The document argued that while the masses view AI as a mere technological progression, the reality is a sprint toward AGI that will reorder the global economy and geopolitical balance of power.

But Aschenbrenner is not merely a theoretician; he has put his capital where his convictions lie. He launched Situational Awareness LP, a hedge fund seeded by Silicon Valley heavyweights including Nat Friedman (Meta AI product lead), Daniel Gross (co-lead of Meta Compute), and Stripe co-founders Patrick and John Collison.

The fund’s performance has been staggering. Launched in September 2024 with roughly $225 million, the fund grew its disclosed U.S. equity book to $5.52 billion by the end of 2025, a roughly 22-fold increase in twelve months. As of early 2026, the portfolio’s total return exceeded 100% year-to-date, generating more than 96 percentage points of alpha over the S&P 500.

Crucially, Aschenbrenner is not betting on the AI models themselves. Instead, his portfolio, featuring massive positions in power producers like Vistra and Constellation Energy, and infrastructure plays like Bloom Energy and CoreWeave, reflects a singular thesis: the real bottleneck to AGI is not algorithmic, but physical. He is betting that electricity generation and computing capacity will be the most valuable assets of the coming decade.

Dwarkesh and Leopold’s Conversation in 2024:

The “Situational Awareness” Thesis and the Trillion-Dollar Cluster

At the core of Aschenbrenner’s Situational Awareness is the concept of the “Intelligence Explosion.” He argues that the scaling laws governing LLMs dictate that as we pour exponentially more data and compute into these systems, their capabilities will increase predictably and dramatically. This is not a plateauing technology; it is an accelerating one.

To facilitate this explosion, the physical infrastructure required is almost unfathomable. Aschenbrenner envisions the construction of “Trillion-Dollar Clusters,” massive, gigawatt-scale datacenters that will consume more electricity than small nations. This necessitates a complete overhaul and expansion of the global power grid, a renaissance in nuclear and natural gas power generation, and a supercycle for the specialized equipment that cools, connects, and powers these facilities.

Based on his manifesto, we identify several key investment themes that align with this physical bottleneck thesis:

1. Power Generation (Nuclear, Natural Gas, Renewables): The energy density required by next-generation AI clusters cannot be met by the existing grid. We need baseload, reliable power at huge scale.

2. Power Grid & Electrical Infrastructure: Getting power from generation to the datacenter requires massive upgrades in transformers, switchgear, and high-voltage transmission lines.

3. Datacenter Construction & Cooling Technology: The thermal management of gigawatt clusters requires advanced liquid cooling and specialized engineering.

4. Energy Infrastructure Equipment: The picks and shovels of the energy renaissance, from natural gas compressors to pipeline components.

5. Copper & Power Grid Materials: The electrification of everything, compounded by AI, creates a structural deficit in critical conductive materials.

6. Networking & Connectivity: Moving terabits of data between thousands of GPUs requires advanced optical networking and telecommunications infrastructure.

Hunting for Value in the AI Infrastructure Supercycle

While the market has recognized the AI infrastructure theme, bidding up darlings like NVIDIA and Vertiv to astronomical multiples, we believe it is important to remain disciplined with regard to the price we are willing to pay.

We set out to answer this question: Can we find companies that are direct beneficiaries of the Aschenbrenner thesis, but which are still trading at deep value multiples?

To accomplish this, we cast a global net, screening thousands of companies across the micro-cap ($20M to $500M) and small-cap ($500M to $5B) universes. We filtered these universes through a strict value lens, requiring at least one of the following criteria to be met:

• Price to Book (P/B) ≤ 1.5x (and ≤ 1.0x for micro-caps)

• Trailing P/E < 15x (and < 10x for micro-caps)

• Price to Sales (P/S) ≤ 2.0x (and ≤ 1.0x for micro-caps)

• Dividend Yield ≥ 4.0% (and ≥ 6.0% for micro-caps)

This quantitative screen yielded hundreds of discounted candidates. However, cheapness alone is insufficient; we also looked for evidence of fundamental momentum. We deployed an automated research process to analyze the most recent earnings reports, press releases, and earnings call transcripts for every passing company. We specifically searched for management commentary indicating strong demand growth acceleration, record backlogs, and explicit mentions of tailwinds from AI, datacenters, or power infrastructure.

The results were illuminating. We found dozens of obscure, overlooked companies where management is explicitly telling the market that their businesses are inflecting due to the forces Aschenbrenner described, yet their stock prices still reflect stagnation or decline.

Selected Global AI Infrastructure Value Plays

We present nine stocks from a much larger initial list. These companies represent a diverse cross-section of the AI infrastructure themes, trade at compelling valuations based on our stated criteria, and score highly on our demand growth acceleration metrics.

We also include six in-depth PDF documents generated along the way as we conducted our research. These documents contain a larger array of companies, along with relevant direct quotes from recent earnings calls, substantiating the demand acceleration thesis at selected companies.

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When I share an API key with an LLM such as Claude, the model stops guessing. It pulls from a credible source with a schema, a version, and a contractual provenance. Research gets materially better because the retrieval surface is no longer the open web but an authoritative feed.

That reframed the question for me. If I, as a niche participant, am paying for API access because it makes AI more trustworthy, then every enterprise AI deployment (e.g., credit, travel, compliance, or research agents) will eventually do the same. The companies that supply the data on the other end of those API calls could see a step-change in demand. Before LLMs, MOI had not subscribed to any APIs; now we are up to a half-dozen and growing.

I asked Claude to run a comprehensive global screen. The report came back with more than sixty names across financial, geospatial, legal, health, industrial, and consumer data categories. What follows is a curated summary of the Top 10 ideas I found most intriguing.

What makes data valuable to an agent

Five properties matter:

• Authority. Regulators, auditors, or litigants are required or expected to cite the source.

• Sensor production. The data is generated by owned infrastructure (satellites, probes, labs, payment rails, panels) and cannot be scraped.

• Network exclusivity. Two-sided platforms where buyers and sellers both stand on one surface.

• Temporal depth. Multi-decade archives that cannot be recreated by a new entrant.

• Agent-callable surface. The data is served through versioned APIs with machine-readable schemas and transparent pricing.

The durable opportunities score on at least three of the five. “We own data” on its own is not a moat. And, the revenue model has to capture per-query agent economics, not per-seat SaaS that agents will compress.

The paradox the market is handing us

In 2025–26 the market repriced data businesses downward on the fear that frontier LLMs would disintermediate them rather than elevate them. Wolters Kluwer is off ~55% YoY; Thomson Reuters ~47%; FICO ~47%; Equifax ~28%. Rightmove, Hemnet, and Scout24 have been halved. RELX sold off ~20% on the February 2026 Anthropic news. Clarivate trades at roughly 0.7× sales on a high-margin recurring-revenue base.

If the “agents need authoritative data” thesis is directionally right, then this cohort represents the cleanest contrarian setup of the cycle. Here are the Top 10 names I am going deeper on in my own research.

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For those who couldn’t join us, here is a synthesis of the key insights and specific investment thesis highlights shared by our community of intelligent capital allocators. (Note: I have intentionally omitted most participant names in order to preserve their privacy.)

Life sciences: a setup still hiding in plain sight

Elliot Turner, Managing Partner and CIO of RGA Investment Advisors, opened with a multi-year research subject of his: picks-and-shovels life sciences. The argument is that the post-COVID overbuild has finally burned off, that tariffs, FDA disruption, and NIH funding strains are in the rearview mirror, and that these companies have quietly re-accelerated even as the market has refused to notice. Meanwhile, some of the most credible voices, including Jensen Huang, Demis Hassabis, Anthropic’s leadership, and even Stan Druckenmiller, are converging on life sciences as the single most compelling field for AI deployment. The gap between that chorus and the tape on these stocks is the opportunity.

Elliot’s two specific names: Sartorius (Germany: SRT, SRT3) and Bruker (US: BRKR). He frames Sartorius as one of only two pure plays on actually making biologic drugs, the other being Repligen. Within the Sartorius complex, his preferred vehicle (for investors who can live with the liquidity) is the preference shares, which currently trade at roughly a 20%+ discount to the ordinaries; historically they’ve traded close together. He also flagged a catalyst: the Sartorius family trust expires in 2028, ending a standstill with the founding family’s heirs, which could open the door to a takeover or capital actions not on the table so far.

On Bruker, the pitch is a founder-family-led business at its cheapest valuation ever (roughly 13x fully loaded earnings), with recurring revenue now at 40% of sales, up from 20%. He thinks the recent preferred issuance was unnecessary in hindsight, since the NIH resumed disbursements shortly after, but the business itself is well positioned. A large-cap-oriented member then echoed the thesis from the other end of the market-cap spectrum, favoring Danaher (US: DHR), Thermo Fisher (US: TMO), and Agilent (US: A), noting that the sell side won’t get interested until the inflection is clearly behind us.

A follow-up came on Avantor (US: AVTR). Elliot’s verdict: salvageable, but not nearly the asset management presented during the better years. Pieces of the portfolio are excellent, and the whole thing would be an attractive PE or strategic takeover target.

Payments: Adyen as a software-priced anomaly

Elliot’s largest software-adjacent position is Adyen (Netherlands: ADYEN; US: ADYEY). The bull case: 20% of market cap is cash, the company guided to 21–23% growth, got a 20% drawdown for its trouble, and trades at 22x this year’s EPS (mid-teens ex-cash), with some bottom-line leverage on top. 50% EBITDA margins, and a capex cycle rolling over. Adyen’s differentiators, as the UK-based investor who owns it as his largest position laid out, are enterprise-grade customers (Microsoft, McDonald’s, LVMH, Hugo Boss), a fully in-house stack that makes acquisitions nearly impossible, and cultural continuity despite the recent co-CEO handoff (Pieter van der Does stepped down; his co-founder remains).

The debate centered on the $5 billion of cash. Both Elliot and the UK member believe a buyback is the most sensible use of capital at this valuation, and both are implicitly betting management eventually gets there.

In response to a question on Shift4, Elliot’s work points to a lower-quality growth algorithm: processed-volume growth is high, but true organic volume on their own rails is essentially flat. It’s a “land-and-expand via acquisition” model targeting small business rather than enterprise.

Guidewire and the software-vs-AI standoff

Elliot flagged Guidewire (US: GWRE) as the rare vertical-software name that may actually benefit from AI, because it sits on a mountain of insurer data and prices on direct written premium rather than seats, so the standard “AI kills seats” argument doesn’t apply. A portfolio manager who sold the name in 2024 agreed with the moat (system, software, and service in one).

That set up the most animated debate of the call. On one side: a member who has been a student of the playbook of Constellation Software (Canada: CSU) argued that vertical market software is Constellation’s market to lose. His thesis rests on the scale of Constellation’s private-company database (essentially every VMS vendor on earth), the discipline of keeping annual relationships with every one, and Topicus’s 2025 acquisition cadence (more deals than the prior four years combined) — all of which AI only reinforces, because cheaper R&D favors incumbents who already own the workflow and the data. A second member, who has been adding to Constellation, Topicus (Canada: TOI), and Lumine Group (Canada: LMN), argued that for the typical customer, Constellation’s software is under 1% of revenue, so full in-house replacement generates rounding-error savings against the risk of breaking a mission-critical system.

The pushback: The real threat isn’t a weekend vibe-coder; it’s well-funded, industry-expert small teams with the Andreessen Horowitz playbook, AI tooling, and a plan for distribution. A16Z is literally publishing step-by-step guides on disrupting previously undisruptable verticals. And the rule that we overestimate one-year AI progress and underestimate decade progress applies with force. It’s easier to align with assets that benefit from AI adoption than debate moats that may look very different in five years.

An investor-programmer member summarized the in-between view: incumbents likely win eventually because they own the workflow and the data, but the intervening years are an arms race, and the question is how much margin and pricing gets competed away. He also nudged the group toward a more direct way to play AI: real-world operators like pest control and elevator maintenance, where productivity gains are not yet priced in.

Real assets, real estate, and Europe

I’ve been parking capital in undervalued European residential real estate, specifically Vonovia (Germany’s largest apartment owner, ~$20 billion market cap, less than one-half of NAV) and Aroundtown (less than one-third of NAV, engaged shareholder, recent buyback). Real estate is classic inflation protection that underperforms in the first leg of rates rising and catches up once pricing power gets recognized. It’s also one of the few places you don’t have to hold a view on AI.

A US-based investor added Healthpeak Properties (US: DOC) as his own life-sciences-adjacent real-estate idea: the Janus senior-housing IPO unlocked value that leaves the RemainCo (medical office buildings and lab space) trading above a 9% cap rate with a fortress balance sheet. He’s also watching Brad Jacobs’s vehicle as a roll-up in distressed home-building supply.

For European industrials more broadly, I’d point to the thesis that the US cheap-energy advantage is structural and that German energy policy has hobbled its industrial base. Plenty of US chemical names are still interesting.

A UK small-cap specialist confirmed that overseas buyers are now calling about UK-listed international businesses at London discounts, Auction Technology Group (UK: ATG) being a recent case in point. His playbook: market leaders with asset backing that have over-spent capex for three or four years and convert to cash generators in an inflationary environment. He won’t touch UK housebuilders (Barratt, Redrow, Vistry); expected rate cuts have flipped to potential hikes and build costs have exploded.

A special situation

Finally, a member I hold in high regard walked the group through a mineral-royalty owner the institutional world doesn’t bother tracking. I refer to the entity tongue-in-cheek as the next Texas Pacific Land Trust. While the member shared the name with the call participants, he stated that he is still building a position and would prefer the name not to be released.

I found yesterday’s call incredibly valuable, and I hope this summary provides you with a few actionable insights for your own capital allocation process.

Our next live call will be on June 24 at 2:00 pm ET. No formal registration is needed; you can simply click the following link at the scheduled time to join.

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“Grassroots Macro,” as described by Bob Robotti, highlights a structural shift favoring the “boring” economy. The West, particularly North America, possesses a sustainable, multi-decade competitive advantage rooted in low-cost energy. This advantage is fueling a re-industrialization and “friend-shoring” boom, reversing decades of offshoring.

While the 2D world of software faces deflationary pressures from AI, the 3D world of industrial manufacturing and logistics is entering a renaissance. The beneficiaries are the companies that make the nuts, bolts, glass, and specialty materials that hold the physical world together. These businesses, often ignored by growth-obsessed investors, are now positioned to compound value through operational excellence, consolidation, and the return of industrial capacity to the West.

This report serves as a playbook for “Intelligent Investing 3D.” It moves beyond the macro thesis articulated in our foundational essay to identify actionable ideas within the Industrial sector, specifically targeting Chemicals, Steel, Diversified Industrials, Pulp & Paper, and Recycling. The analysis synthesizes insights from leading real-asset managers including Massif Capital, Horizon Kinetics, and Goehring & Rozencwajg, alongside data from major investment banking research divisions.

The core finding is that the “Old Economy” is not merely rebounding; it is undergoing a metamorphosis into a high-technology, capital-disciplined, and geostrategically critical ecosystem. The build-out of AI infrastructure is voraciously physical. It requires specific fluoropolymers for thermal management, grain-oriented electrical steel for voltage transformation, and sustainable fiber for packaging and fuel. Value is shifting from the digital economy to the industrial economy.

Companies mentioned inside:

Chemicals

The chemical industry stands at the intersection of energy policy and high-tech manufacturing. The investment thesis relies on two pillars: the geographic arbitrage of energy costs and the critical role of specialty chemicals in the AI hardware stack.

US Advantage vs. European Deindustrialization

A profound divergence has emerged between the North American and European chemical sectors. The US chemical industry benefits from a structural feedstock advantage: abundant, low-cost natural gas and ethane derived from the shale revolution. Conversely, the European sector faces an existential crisis driven by high energy costs and regulatory burdens.

Chemical production is energy-intensive. In Europe, natural gas prices remain significantly higher than pre-crisis levels, rendering baseload production of commodities like ammonia and petrochemicals uncompetitive.

European Decline: European chemical production contracted in 2022 and 2023, and the recovery remains elusive. Major players continue to shut down crackers and rationalize assets. The “deindustrialization” of Europe is not a temporary phenomenon but a structural unwinding of capacity. Arkema (~€52, ~€4.0B market cap) reported FY2025 revenue down 5% to €9.07B with EBITDA of €1.25B at a 13.8% margin. The company is expanding PVDF capacity at Changshu, China (20% expansion, startup 2028) and Calvert City, KY (15% expansion, startup mid-2026) for battery and semiconductor markets, but 2026 guidance calls for only “slight EBITDA growth.” Solvay (~€24, ~€2.5B market cap), the post-demerger soda ash and peroxides business, delivered €881M EBITDA on €4.26B revenue but guides to lower 2026 EBITDA of €770–850M. At ~5.2–6.6× EV/EBITDA with a 12–14% FCF yield, Solvay screens as a deep value play. Morningstar’s fair value estimate of €74 is ~3× the current stock price.

US Dominance: US producers, leveraging Henry Hub natural gas pricing, are positioned to capture global market share. Companies like Westlake Corporation (WLK, ~$111, ~$14.3B market cap) and Olin Corporation (OLN, ~$26, ~$3.0B market cap) are prime beneficiaries. They operate in energy-intensive chains (chlor-alkali, PVC) where the US cost advantage translates directly into FCF margin expansion. Both companies are currently navigating a cyclical trough: Olin’s Q4 2025 adjusted EBITDA of $67.7M badly missed guidance, with full-year EBITDA landing at ~$585–635M, well below management’s mid-cycle bridge. Westlake booked $1.39B in identified items during 2025 reflecting the shutdown of three North American chlorovinyls plants, one styrene plant, and the Pernis (Netherlands) facility. However, Westlake’s three-pillar improvement plan targets $600M of incremental earnings in 2026 through structural cost cuts, closed-facility savings, and reliability improvements.

The AI “Cooling” Thesis: Fluoropolymers

While basic chemicals play a volume game, specialty chemicals are playing a technology game. The explosion of AI data centers has created a critical bottleneck: heat. High-performance GPUs (like Nvidia’s Blackwell architecture) generate immense thermal loads that traditional air cooling cannot manage. This is driving a transition to liquid cooling, specifically two-phase immersion cooling.

The fluids required for immersion cooling are often fluorinated chemistries (fluoropolymers) due to their dielectric properties and thermal stability. Furthermore, fluoropolymers are indispensable in the semiconductor manufacturing process itself, used in piping and storage for high-purity chemicals. The production of fluoropolymers is technically difficult and heavily regulated (PFAS regulations). This creates high barriers to entry.

Key Players:

The Chemours Company (CC, ~$17.81, ~$2.7B market cap): The AI cooling thesis is materializing. Chemours’ Thermal & Specialized Solutions segment delivered a record Q4 2025, with Opteon refrigerant sales growing 56% for the full year (now representing 75% of total refrigerant revenue, up from 56%). The company has signed a JDA with 2CRSi for Opteon two-phase immersion cooling, secured Samsung qualification for data center SSDs, and sizes the liquid cooling TAM at $550M by 2026, growing to $1.5B by 2030 and $3B by 2035. However, the balance sheet is stressed at ~$4.0B+ net debt with negative tangible book value, and PFAS liability remains the tail risk (the NJ settlement alone is $875M over 25 years). 2026 guidance calls for $800–900M adjusted EBITDA, implying ~9× EV/EBITDA at midpoint.

3M (MMM, ~$146, ~$76B market cap): The litigation overhang is clearing. The $6B earplug settlement has paid out over $3.1B with zero cases remaining. The $10.3B PFAS water contamination settlement received final court approval. FY2025 adjusted EPS came in at $8.06 (+10% YoY) with $4.4B in adjusted FCF. 2026 guidance of $8.50–$8.70 adjusted EPS implies continued mid-single-digit growth. The stock trades at ~17× forward P/E and ~11× EV/EBITDA with a 5.8% FCF yield.

Arkema & Solvay: European players expanding capacity (as detailed above), though they face structural energy headwinds. Arkema trades at ~5.2–6.1× EV/EBITDA with a 6.4–6.9% dividend yield.

Chlor-Alkali: The Building Block of Infrastructure

Chlor-alkali chemistry (producing chlorine and caustic soda) is the “bread and butter” of the industrial economy. Chlorine is essential for PVC (construction, pipes) and water treatment, while caustic soda is used in pulp & paper and aluminum refining.

The sector is characterized by a “co-product imbalance.” Demand for chlorine (construction-led) and caustic soda (industrial-led) rarely moves in sync, leading to volatile pricing. However, capacity rationalization in the US (Westlake shut three chlorovinyls plants in 2025) is restoring pricing power, and caustic soda inventories entered 2026 at very low levels.

The deployment of funds from the US Infrastructure Investment and Jobs Act (IIJA) serves as a long-term demand driver for PVC (pipes) and epoxy resins (coatings), directly benefiting the chlor-alkali chain. Westlake’s Housing, Infrastructure & Pipes (HIP) segment remains resilient, with 2026 guidance of $4.4–4.6B in HIP revenue at 19–21% EBITDA margins.

Olin Corporation (OLN) and Westlake Corporation (WLK) operate in an oligopolistic US market structure. With European capacity offline due to energy costs, these US producers effectively control the Atlantic basin marginal supply. Both are currently navigating a cyclical trough: Olin at ~9–10× TTM EV/EBITDA with 4.1× leverage and a Fitch downgrade to BB+, Westlake at ~15.5× TTM EV/EBITDA but with an investment-grade balance sheet (BBB+/BBB/Baa) and $2.9B in cash. The sector faces margin compression from Chinese capacity overexpansion and export “dumping,” but this is a cyclical rather than structural headwind. Olin has filed anti-dumping petitions on epoxy resins against five countries, and the EU imposed definitive duties on similar imports in July 2025.

Smart Money Endorsement

The sector’s strategic value was validated on January 2, 2026, when Berkshire Hathaway completed its $9.7 billion all-cash acquisition of OxyChem, Occidental Petroleum’s chemical division and a top-3 US manufacturer of PVC, chlor-alkali, and chlorinated organics. The deal valued OxyChem at ~8× projected 2025 EBITDA — Berkshire’s largest acquisition since the $11.6B Alleghany deal in 2022, consistent with Buffett’s preference for productive, cash-generating commodity assets bought at attractive cycle pricing. Occidental earmarked $6.5B of proceeds for debt reduction, and legacy environmental liabilities were retained by an Occidental subsidiary.

The gap between the Berkshire transaction multiple and current public trading multiples remains significant. Olin trades at ~9–10× TTM EV/EBITDA, but management’s mid-cycle EBITDA target of $2.0B (vs. ~$585–635M in 2025) implies a forward valuation of roughly 3.5×–4.0× on normalized earnings, supported by a $1.9B remaining share repurchase authorization (though buybacks have been curtailed to $50.5M in 2025 as management prioritizes deleveraging). Westlake trades at a higher optical multiple of ~15.5× TTM EV/EBITDA due to depressed earnings but is executing a $200M structural cost reduction program and targets $600M of incremental earnings in 2026.

Investors have the opportunity to acquire similar industrial infrastructure assets in the public markets at a discount to the price paid by a disciplined capital allocator, positioning themselves to benefit from the eventual recovery in global industrial demand. The entry point is cyclically depressed, which is precisely when Buffett chose to act.

Steel

Steel is often dismissed as a commoditized, cyclical industry. This view ignores the rapid technological stratification within the sector. The opportunity lies not in generic rebar, but in Grain-Oriented Electrical Steel (GOES) and high-strength alloys required for grid modernization and defense.

The Electrical Steel Bottleneck

There is no AI without electricity, and there is no electricity without transformers. Every step-up and step-down of voltage across the grid requires a transformer, and the core of every transformer is made of GOES.

The US suffers from a chronic shortage of distribution transformers, with lead times extending significantly. This shortage is exacerbated by the demand shocks from AI data centers, EV charging networks, and renewable energy interconnects. Producing GOES is technically demanding and capital intensive. There is limited domestic capacity in the US.

Cleveland-Cliffs (CLF, ~$8.03, ~$4.5B market cap) is the sole producer of GOES in North America, a natural monopoly on a critical national security asset. The company is in distressed territory today, with ~$7.2B net debt against essentially zero full-year EBITDA ($37M adjusted in FY2025), having burned $1.0B in FCF and issued 75M new shares. However, the turnaround thesis hinges on multiple catalysts converging in 2026–2027: the GOES expansion at Butler, PA (operational late 2026–early 2027); the Weirton, WV transformer plant (online H1 2026, ~$150M investment, adding 30–40% to GOES demand); 50% Section 232 tariffs on steel imports; a strategic MOU with POSCO for a ~$700M equity investment (≥10% stake, definitive agreement targeted H1 2026); and a $500M EBITDA improvement from terminating a slab supply contract.

Recent Department of Energy efficiency standards have confirmed the continued necessity of GOES (vs. amorphous metal alternatives), solidifying CLF’s market position. Section 232 tariffs now extend to downstream electrical steel laminations, preventing circumvention and protecting domestic margins. At 0.73× P/B and 0.21× P/S, CLF is deeply distressed but carries significant optionality.

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For those who couldn’t join us, here is a synthesis of the key insights and specific investment theses shared by our community of intelligent capital allocators. (Note: I have intentionally omitted most participant names in order to preserve their privacy.)

Real Assets and the Energy Opportunity

We kicked off the discussion with Will Thompson, a skilled real asset investor and manager at Massif Capital.

Will currently holds about 60% of his portfolio in mining but is actively recycling capital into energy. While noting that finding interesting opportunities in gold is exceptionally difficult right now, he views oil and natural gas as compelling — resembling the hated, multi-bagger setup we saw in metals and mining a couple of years ago.

Regarding metals, Will pointed out that while copper has run hard, a price of $5.80 per pound is essentially just the incentive price required to finance a new mine, meaning the commodity likely still has room to run.

Will is particularly bullish on European oil and gas operators, highlighting names like Harbour Energy, Aker BP, Equinor, and Var Energi. His thesis rests on three pillars:

• They possess the best balance sheets in the industry.

• They offer high single or double-digit dividend yields combined with sensible share buybacks.

• Unlike US fracking names that rely purely on higher oil prices, European operators are actively growing their production bases and reducing costs, driving bottom-line free cash flow.

For investors looking at the complex uranium macro story, Will mentioned Global Atomic, a company he recently presented in-depth for MOI Global, as an attractive, albeit somewhat politically risky, way to express a positive company view.

Surviving the “SaaS-pocalypse”

The conversation transitioned into the recent software drawdowns, or what we’ve been calling the “SaaS-pocalypse”. AI is shifting the ground under the foundational layers of the software world, radically changing our own analytical workflows through tools like Gemini and Claude.

A member based in Texas noted that holding Adobe currently feels like standing on “shifting sand,” as large language models increasingly replicate creative tasks. Another fund manager warned of the shift from seat-based to consumption-based models, raising questions about how much tech spend will be siphoned off by foundational AI models like Anthropic.

However, the consensus was clear: Moats survive where proprietary data and strict privacy walls exist.

• Vulnerable: Traditional intermediaries and workflow tools lacking proprietary data (e.g., Monday.com) face high substitution risks.

• Defensible: Companies entrenched in secure, highly regulated silos, such as Paycom and Intuit (payroll and tax data) or SS&C (specifically its Intralinks virtual data rooms for private equity, are unlikely to be disrupted by open-source AI tools.

• Data Monopolies: Information services like S&P Global and Moody’s remain attractive, as financial markets demand tried-and-true, heavily regulated benchmarks that a generative AI bot cannot replicate.

The 3D Economy and “National Champions”

As a direct hedge against digital disruption, Pedro Zuloaga advocated for “3D economy” companies, i.e., businesses operating in the physical world.

Following the pattern of Buffett’s acquisitions, Pedro looks for “national champions” or oligopolies occupying disciplined niches. Examples include Owens Corning and chemical producer Olin. Because these companies own their factories and tightly control supply, they can survive brutal demand fluctuations and geopolitical shocks (like the tariffs of 2025 and 2026) while keeping their earnings surprisingly stable. I agree: chemical cyclicals offer a great way to hide from the carnage seen in other sectors.

Specific Idea Updates

Participants also shared brief updates on several specific watchlist ideas:

• ASML: An asset manager running a long-term compounder strategy noted that while ASML’s intrinsic value has grown to roughly 950 euros per share, the stock is trading at 45 times earnings with a 2% FCF yield. He advises a healthy trimming for portfolio management purposes, as recent price action has been driven more by multiple expansion than fundamental value.

• Fiserv: At roughly $60 a share and guiding for $8+ EPS, Fiserv sparked debate. One participant is content holding the stock at a perceived 60% discount to intrinsic value, citing its massive, highly regulated distribution moat with global banks. Conversely, another manager cautioned about execution risks and stagnant growth following the departure of the former CEO.

• London Stock Exchange Group (LSEG): A seasoned value investor recently initiated a position here to take advantage of the SaaS sell-off, attracted by the secure paywall protecting its Russell benchmarks and its 50% ownership in Tradeweb.

• SFS Group: A participant focusing on European equities highlighted this Swiss-listed machinery company. It has faced heavy headwinds from German deindustrialization, tariffs, and a strong Swiss franc, but remains a high-quality play poised to benefit from a recovery in the chemicals market and increased customer certainty in Germany.

I found this call incredibly valuable, and I hope this summary provides you with a few actionable insights for your own capital allocation process. We plan to hold these open forums on a regular basis going forward.

Our next live call will be on April 14 at 2:00 pm ET. No formal registration is needed; you can simply click the following link at the scheduled time to join the conversation.

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The global financial system stands at the precipice of a regime change as significant as the dissolution of the Gold Standard in 1971 or the Dot-Com peak of 2000. As outlined in The Great Rotation, the last decade has been defined by the “2D World,” an ecosystem of bits, software, and infinite scalability. This era of near-zero marginal costs and asset-light business models generated unprecedented concentration in the S&P 500, particularly within the Mag 7. However, the economic logic underpinning this digital hegemony is fracturing.

We are witnessing the collision of two opposing forces: a deflationary supply shock in the digital realm driven by Generative AI, and an inflationary supply cliff in the physical “3D World” driven by capital starvation and geological entropy. Until very recently, the market has priced the 2D world for perfection, assuming margins will remain elevated indefinitely despite the commoditization of code and content, while pricing the 3D world for irreversible decline.

In Part 2 of The Great Rotation Playbook we articulate the investment case for the Metals & Mining sector as a primary beneficiary of this rotation. The thesis is not merely one of cyclical reversion but of structural necessity. The AI buildout is voraciously physical; it cannot exist without the copper for transmission, the nickel for storage, and the baseload power provided by uranium.

We draw upon the “Capital Starvation” frameworks of Massif Capital, the “Scarcity Investing” philosophy of Horizon Kinetics, and the “Anti-Carry” thesis of Goehring & Rozencwajg to demonstrate that the mining sector offers the most asymmetric risk/reward profile in modern markets. This is the metamorphosis of the Old Economy: from a despised cyclical trade to a strategic imperative.

The Macro Setup

The financial environment of the last decade was a “carry regime”, a period of low volatility and suppressed interest rates that incentivized leverage and long-duration assets (tech stocks) while punishing short-duration, real assets (commodities). Goehring & Rozencwajg argue this regime creates a feedback loop where capital flows blindly into the largest capitalized companies, creating a “suction pump effect” that starves the physical economy of investment.

The “carry bubble” is characterized by leverage-dependent, short-volatility trades that thrive when conditions remain steady. In such an environment, financial assets are pushed far above levels justified by the underlying economy, sometimes exceeding 200% of GDP. Natural resource equities, conversely, are typically ignored or used as a funding mechanism for the long side of the carry trade (i.e., investors short commodities to buy tech).

We are now transitioning to an “anti-carry” regime. In this environment, volatility rises, inflation becomes sticky (or “localized” in scarce assets), and the correlation between bonds and equities flips positive. History suggests that during anti-carry periods, such as the 1970s and the early 2000s, resource equities do not just outperform; they often become the only asset class to deliver positive real returns. Following the collapse of the 1970s carry bubble, oil and commodity stocks became the primary driver of returns, with oil companies eventually accounting for one-third of the S&P 500’s market capitalization. Currently, oil wealth makes up only 3% of the aggregate wealth of the Forbes 400, compared to 20% in 1982, suggesting room for mean reversion.

AI as a Physical Inflationary Force

A critical misunderstanding in the current consensus is the belief that AI is purely deflationary. While AI collapses the cost of digital labor (coding, writing, analysis), it is an inflationary shock to the physical supply chain.

• Energy intensity: An AI query requires significantly more energy than a traditional search query. Training a single large AI model consumes gigawatt-hours of electricity.

• Infrastructure density: AI data centers are massive industrial warehouses packed with silicon, copper, and steel. They require up to 4x the copper density of traditional server farms for power distribution, grounding, and connection. Goldman Sachs estimates that AI will drive a 165% increase in data center power demand by 2030.

• Grid stress: The simultaneous electrification of transport (EVs) and intelligence (AI) is placing an impossible load on electrical grids. We are asking the grid to retire dispatchable fossil fuel power (coal/gas) while adding massive new loads from AI data centers, creating a “Greenflation” and “Tech-flation” dynamic.

The “2D World” is parasitic on the “3D World.” As the digital economy attempts to scale, it hits the hard constraints of physics and thermodynamics. This bottleneck transfers pricing power from the consumer of resources (Big Tech) to the producer of resources (Miners).

Capital Starvation Thesis

The physical economy has been starved of capital due to a long-term focus on technology and ESG mandates. Murray Stahl of Horizon Kinetics describes this as a “suction pump effect,” where investors crowd into “Tech Exceptionalism,” pulling capital out of the broader market and concentrating it into a handful of mega-caps.

The S&P 500 has become historically concentrated, with the IT sector (inclusive of Amazon, Meta, and Alphabet) comprising roughly one-half of the index’s market value. This concentration leaves passive investors exposed to a regime change. Meanwhile, mining and energy companies have been punished by shareholders demanding dividends over growth, leading to neglect of exploration and development.

This lack of investment has created a “coiled spring” of potential returns. The world has consumed the surplus capacity of the 3D world, and just as demand is inflecting upward driven by AI, supply is hitting a wall. This sets the stage for the “Great Rotation” of capital from overvalued 2D assets to undervalued 3D assets.

Copper

Copper is the most critical vector for the “Intelligent Investing 3D” thesis. It is the physical manifestation of the “supply cliff” argument.

Goldman Sachs and Massif Capital project a structural deficit that is mathematically impossible to close within the current investment cycle. It takes 10–25 years to bring a new tier-one copper mine from discovery to production; we are paying for the lack of exploration spend between 2012 and 2020. Existing major mines (e.g., Escondida in Chile) are suffering from declining ore grades, requiring more energy and capital just to maintain production.

2024–2025 has seen major supply shocks. The closure of First Quantum’s Cobre Panama mine and disruptions at Freeport’s Grasberg mine (mudflow incident) have removed significant tonnage from the market. Goldman Sachs revised its 2025 forecast from a surplus to a deficit following the Grasberg disaster.

According to S&P Global, “Even as global demand is accelerating along these vectors, current supply is on course to decline as existing resources age. Without meaningful expansion of supply, the result could be a 10 million metric ton shortfall by 2040.”

Copper Market Balance, 2020-2040 (MMt Cu)

Goldman Sachs is even more bullish, as it forecasts a copper supply gap of up to 6 million tonnes as early as 2030, driven by the green and AI demand vectors. It projects copper prices to reach $15,000 per tonne by 2025. In this environment, the copper price is not just a function of GDP growth; it is a function of physical availability.

Let’s turn to actionable ideas.

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The investment landscape is undergoing a shift. For two decades, the market has been defined by the ascendancy of the “2D World” — the realm of screens, software, and digital engagement. Capital flooded into assets that offer near-infinite scalability and zero marginal costs, driving valuations of technology mega-caps to perfection. This era of digital abundance, however, is colliding with a new reality: the resurgence of the “3D World.”

As Generative AI accelerates the commoditization of code and content, unleashing a deflationary supply shock on the digital economy, the physical world is entering an era of structural scarcity. You cannot “prompt” a copper mine into existence. You cannot “generate” baseload power with an algorithm. The 3D world, governed by physics, geology, and thermodynamics, is facing a supply cliff after a decade of chronic underinvestment.

The opportunity for investors lies in this disconnect. While the “Mag 7” remain priced for frictionless growth, the leaders in energy, materials, and infrastructure are often priced for stagnation or extinction. Last month, we explored this tectonic shift and the resulting opportunity for investors in an essay entitled, The Great Rotation: The Case for Intelligent Investing 3D.

In this report (and subsequent future reports), we provide The Great Rotation Playbook, an actionable framework for reallocating capital into the 3D world, highlighting specific securities that serve as the backbone of the physical economy. We start with “Theme 1: The Energy Backbone of AI.”

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AI is not merely code; it is a consumer of power. The digital revolution faces a physical constraint: energy. We are entering an era of “Tech-flation” and “Greenflation,” where the demand for compute power collides with a strained grid and a supply chain suffering from years of underinvestment. To support the AI ecosystem’s 24/7 uptime requirements, the world needs a massive expansion of reliable, baseload energy.

The Macro Framework

To understand the magnitude of the opportunity in energy, we must appreciate the theoretical underpinnings of the current market dislocation. The prevailing bias is one of “Tech Exceptionalism,” a belief nurtured by a decade of outperformance that suggests technology is the only vector for growth. However, history suggests returns are mean-reverting and driven by the capital cycle.

Capital cycle theory, popularized by Marathon Asset Management, posits a simple yet powerful dynamic: high returns attract capital, which leads to overcapacity and lower returns. Conversely, low returns repel capital, leading to underinvestment, supply shortages, and higher returns.

The 2D world exhibits all the hallmarks of a capital cycle peak. The S&P 500 has reached unprecedented concentration, with the top ten stocks comprising over 38% of the index by 2025. This creates a “suction pump effect,” as described by Murray Stahl, where passive flows blindly chase the largest market caps, divorcing prices from fundamental value and assuming margins will remain high forever.

In contrast, the 3D world — specifically the energy and mining sectors — has been in a brutal bear market for over a decade. Since the commodity peak in 2011, these sectors have been starved of capital. Public pressure, ESG, and shareholder demands for dividends over growth have forced energy companies to slash capex. They stopped exploring, stopped building, and liquidated inventory. As Mohnish Pabrai has noted regarding the coal sector, bank credit effectively dried up. A decade of underinvestment has created a “supply cliff.” Oil wells deplete, copper grades decline, and infrastructure ages. By pricing these assets for extinction, the market has inadvertently set the stage for a dramatic reversal. When demand inflects upward — as it is now doing via AI — there is no spare capacity to meet it.

Will Thomson of Massif Capital provides a framework for understanding the inflationary pressures emerging from this imbalance. He identifies two distinct but reinforcing trends:

• Greenflation: This phenomenon arises from the internal contradictions of the energy transition. The shift to renewable energy is not a shift away from materials; it is a shift toward them. Wind turbines, solar panels, and electric vehicles are more material-intensive than their fossil fuel counterparts. They require vast amounts of copper, aluminum, nickel, and steel. As policy drives capital toward these technologies, the demand for the underlying hard assets surges. However, due to capital starvation in the mining sector, supply cannot respond. The result is rising prices for the very inputs required to decarbonize, increasing the cost of the transition itself.

• Tech-flation: This is the inflationary pressure exerted by the digital economy on the physical world. For years, the digital economy was viewed as deflationary because it lowered the cost of information. However, as it scales into the realm of LLMs and generative AI, it hits physical limits. Data centers are behemoths. They compete for land, water, and, most critically, power. The “Great Convergence” is the moment where the digital world realizes it is parasitic on the physical world. To continue growing, Big Tech must pay a premium for physical resources, driving up the cost of energy and infrastructure for the broader economy.

Goehring & Rozencwajg (G&R) offer a complementary perspective, framing the market shift as a transition from a “Carry” regime to an “Anti-Carry” regime. For the past 15 years, the “Carry” trade (borrowing in low-yielding currencies or assets to invest in high-growth, long-duration assets like tech stocks) has dominated. This trade relies on low volatility and abundant liquidity. However, as resource scarcity drives inflation, volatility returns. In an inflationary environment, the correlation between stocks and bonds flips, and the “Carry” trade unwinds.

G&R argue that we are entering an “Anti-Carry” decade where the winners will be assets that benefit from volatility and rising input costs — namely, commodities and resource equities. They note a bifurcation in the commodity complex: while economically sensitive metals may fluctuate with recession fears, assets like uranium and gold act as “Anti-Carry” hedges, performing well when the broader financial system is under stress.

Let’s dive into 10+ actionable investment ideas in Power Generation, Nuclear Energy, Oil & Gas, and Coal.

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An overview:

• Abercrombie & Fitch…

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For each of the following companies, we provide an up-to-date investment snapshot, reflecting the company’s latest earnings report.

• Golar LNG (GLNG) is a de-risked pure-play on floating LNG infrastructure whose valuation, with a market cap of ~$4.2 billion, fails to reflect its recently secured $17 billion contracted EBITDA backlog.

• Applied Materials (AMAT): As a “picks and shovels” leader for the AI era, AMAT’s valuation does not capture its long-term earnings power, trading at a forward P/E ratio of ~19x, a discount to peers.

• Nu Holdings (NU) is a dominant fintech platform mispriced as a traditional bank; its forward P/E ratio of ~25x is inexpensive for a business with a large, under-monetized customer base and 28% ROE.

• ZIM Integrated Shipping Services (ZIM) is a shipper whose shares trade at 0.45x tangible book value, offering a significant margin of safety.

• Smithfield Foods (SFD) is a vertically integrated food producer whose defensive characteristics are underappreciated by the market.

• EOG Resources (EOG) is a low-cost oil and gas producer whose valuation, at an ~8% FCF yield, fails to reflect its deep inventory of high-return wells and fortress balance sheet.

• Banco BBVA Argentina (BBAR) is a well-capitalized, share-gaining bank leveraged to Argentine recovery, trading at a price-to-book ratio of ~1.2x, reflecting macro pessimism rather than franchise strength.

A small number of seats at our event of the year, Latticework 2025, will be made available soon to our Substack subscribers. Stay tuned!

Latticework 2025 will be held in New York City on October 7th. In fireside chats with audience participation, the summit will explore intelligent investing in a rapidly changing world. Keynote speakers include:

• Chris Bloomstran, President of Semper Augustus Investments Group

• Tom Gayner, CEO of Markel and Director of The Coca-Cola Company

• Saurabh Madaan, Managing Member of Manveen Asset Management

• Scott Miller, Founder of Greenhaven Road Capital

• Bob Robotti, President and CIO of Robotti & Company Advisors

• Tom Russo, Managing Member of Gardner Russo & Quinn

• Will Thomson, Managing Partner of Massif Capital

• Christopher Tsai, President of Tsai Capital Corporation

• Ed Wachenheim III, Chairman of Greenhaven Associates

Disclaimer: The content of this article and website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.

Let’s find out why the following ideas may be worth a closer look.

Golar LNG (Nasdaq: GLNG)

A de-risked pure-play on floating LNG infrastructure. Golar LNG is a high-quality operator of critical energy infrastructure at a valuation that fails to reflect its recently secured, multi-decade cash flow stream. With its entire Floating Liquefied Natural Gas (FLNG) fleet now contracted for 20 years, Golar offers unparalleled visibility into future earnings and FCF generation, underpinned by a management team demonstrating both operational excellence and shareholder-friendly capital allocation.

A transformational quarter has de-risked the business model. The company recently locked in its long-term future by securing 20-year charters for its entire FLNG fleet, adding a massive $13.7 billion to its contracted EBITDA backlog, which now stands at $17 billion. This backlog provides visibility and is further enhanced by the commencement of a 20-year contract for the FLNG Gimi vessel, which reached its commercial operations date in mid-June. Concurrent with these commercial milestones, the company fortified its balance sheet through a $575 million convertible bond issuance, opportunistically using a portion of the proceeds to repurchase 2.5 million shares while increasing its cash position to nearly $900 million.

The company now operates with utility-like cash flow visibility. The recent contracting success has transformed Golar from a company with project and re-contracting risk into a stable infrastructure asset with a $17 billion contracted EBITDA backlog extending for two decades. This long-duration, high-quality revenue stream significantly reduces earnings volatility and insulates the company from the cyclicality of the LNG shipping market. Furthermore, the contracts are structured to provide significant upside potential, with an estimated $100 million in additional annual cash flow for every dollar the offtake price exceeds $8/MMBtu, offering investors a free call option on higher energy prices without the associated downside risk.

Golar's technological leadership and operational prowess create a durable competitive advantage. The company is not merely a vessel owner but a pioneer and leading operator in the complex field of floating liquefaction. Its flagship vessel, the FLNG Hilli, has maintained a perfect 100% economic uptime since commencing operations in 2018, a testament to the company's technical expertise and execution capabilities. This proven track record, combined with proprietary designs that enable faster and more cost-effective project delivery compared to land-based alternatives, establishes a high barrier to entry and positions Golar as the partner of choice for monetizing offshore gas reserves.

Management is executing a shareholder-friendly capital allocation strategy. With its existing fleet fully contracted, the company is now pivoting to return significant capital to shareholders while prudently funding future growth. The recent declaration of a $0.25 quarterly dividend and the opportunistic repurchase of 2.5 million shares underscore this commitment. Furthermore, the recent $575 million convertible bond issuance at an attractive 2.75% coupon demonstrates astute financial management, securing long-term capital that provides the flexibility to fund the next generation of FLNG units from financing proceeds, backed by the strength of its multi-billion dollar backlog.

The primary long-term risk is concentrated counterparty and sovereign exposure. If this investment were to underperform over the next five years, it would most likely be due to the failure of its key counterparty, Southern Energy, to meet its 20-year obligations for the Hilli and Mark II FLNG units. While the contracts are definitive, they are concentrated with a single entity in Argentina, exposing Golar to the risks of that country. A deterioration in Argentina's economic stability or an adverse change in its energy policy could impair the counterparty's ability to perform, jeopardizing the long-term cash flows that form the foundation of the investment thesis.

The market capitalization fails to reflect the magnitude of the de-risked, contracted cash flows. With a market capitalization of approximately $4.2 billion, Golar trades at a fraction of its $17 billion contracted EBITDA backlog. The FLNG Gimi and Hilli vessels alone are contracted to generate a combined ~$436 million in annual adjusted EBITDA, providing a clear line of sight to a dramatic increase in cash generation as the new contracts commence. Analyst price targets average between $46.50 and $51.50, implying a significant upside from the current share price. Given the 20-year visibility and utility-like nature of the company's contracted cash flows, the shares appear materially undervalued on a discounted cash flow basis.

Resources for further research:

• Earnings release

• Earnings presentation

• Investor relations website

• SEC filings

• Presentation at MOI Global conference

Applied Materials (Nasdaq: AMAT)

Applied Materials represents a "picks and shovels" investment on the secular growth of artificial intelligence and high-performance computing. As the leading provider of semiconductor manufacturing equipment, the company possesses a wide economic moat built on decades of materials engineering expertise, a vast intellectual property portfolio, and deep, collaborative relationships with every major chipmaker in the world. While the stock has performed well, its current valuation does not fully capture the long-term earnings power stemming from major technology inflections like Gate-All-Around transistors and High-Bandwidth Memory, which are essential for the AI era and structurally increase the capital intensity of the industry. Under the seasoned leadership of CEO Gary Dickerson, Applied is uniquely positioned to enable and profit from the foundational technology shifts that will define the next decade of computing.

The company's latest quarterly results showcased its record-breaking performance, directly fueled by the ongoing AI investment supercycle. For its third fiscal quarter, Applied delivered revenue of $7.3 billion and non-GAAP EPS of $2.48, representing year-over-year growth of 8% and 17%, respectively. Management explicitly attributed this strength to the "global race for AI leadership," which is driving massive R&D and infrastructure investments from its customers. However, the company also signaled a more cautious near-term outlook, guiding for a sequential revenue decline in the fourth quarter due to a digestion of recent capacity additions in China and the lumpy nature of leading-edge fab buildouts, highlighting the dynamic environment it is currently navigating.

The core of the investment thesis is AMAT's indispensable role in enabling the AI hardware roadmap. The computational demands of AI are forcing a series of fundamental changes in how chips are made, moving from simple 2D scaling to complex 3D architectures. Applied's expertise in materials engineering is critical for these transitions, such as the move to Gate-All-Around (GAA) transistors in logic and the adoption of High-Bandwidth Memory (HBM) for AI accelerators. These inflections are more materials-intensive, increasing the size of Applied's opportunity per wafer start by approximately 30% for GAA alone. The company is a dominant player in the advanced packaging technologies required for HBM, with a market share exceeding 50%, and expects this business to more than double to over $3 billion in the coming years.

AMAT's market leadership is fortified by its scale, technology portfolio, and R&D capabilities. The company is on track for its sixth consecutive year of revenue growth, a testament to its strong execution and strategic positioning. It holds leading market share across numerous product categories and is poised to gain further share in next-generation technologies like advanced DRAM, where it sees opportunities to capture five points of incremental share with the adoption of vertical transistor architectures. This technological dominance translates into superior financial performance, including robust gross margins of nearly 49% and significant FCF generation, which reached $2.05 billion in the most recent quarter.

The company's financial position allows for consistent and significant capital returns to shareholders while simultaneously funding future growth. AMAT maintains a disciplined capital allocation strategy, returning substantial cash to investors through a growing dividend and consistent share repurchases. At the same time, it is making investments to secure its long-term leadership, including over $200 million to strengthen the domestic chip supply chain in the U.S. and operating one of the world's most advanced wafer-level packaging labs in Singapore.

The most significant long-term investment risk is the inherent cyclicality of the semiconductor industry, which is now amplified by geopolitical tensions. While secular trends like AI provide a powerful tailwind, the industry remains subject to periods of over- and under-supply, which can lead to sharp swings in customer capital expenditures. A severe global recession or a significant slowdown in AI investment could lead to a downturn that would materially impact Applied's results. Furthermore, escalating trade restrictions, particularly related to China, could limit the company's addressable market and disrupt its global supply chain, a risk management explicitly highlighted in its near-term outlook.

Applied Materials trades at a reasonable valuation given its quality and growth prospects. A DCF analysis suggests a fair value in the range of $158 to $169 per share, indicating the stock is trading near its intrinsic value. On a relative basis, its forward P/E ratio of ~19x represents a discount to both its peer group and the broader semiconductor industry average. The consensus 12-month analyst price target sits near $196, implying over 20% upside from current levels. Combined with a dividend yield of over 1.1%, the valuation provides an attractive entry point for long-term investors seeking to gain exposure to the foundational layer of the AI revolution.

Resources for further research:

• Earnings release

• Earnings call

• Investor relations website

• SEC filings

• Vltava Fund on AMAT

Nu Holdings (NYSE: NU)

Nu Holdings is a founder-led, technology-driven platform that is systematically dismantling the inefficient incumbent banking oligopoly in Latin America. The company possesses a formidable and widening competitive moat built on a virtuous cycle of structural cost advantages, a superior customer experience, and proprietary data analytics. The market currently misprices Nu as a high-multiple bank, failing to properly value its intangible assets—brand, technology, and a massive, under-monetized customer base—creating a significant dislocation between its market price and long-term intrinsic value.

The most recent operational results underscore the momentum of the business model. The platform expanded to nearly 123 million customers globally after adding another 4.1 million in the quarter, driving record revenue of $3.7 billion, a 40% year-over-year increase on a currency-neutral basis. This impressive top-line growth is translating directly into powerful operating leverage and profitability, with net income surging 42% year-over-year to $637 million and generating a highly attractive annualized return on equity of 28%. Critically, monetization is accelerating, with monthly average revenue per active customer (ARPAC) surpassing $12 for the first time, while the leading indicator of asset quality improved, suggesting disciplined underwriting amid rapid expansion.

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