Milu

There tends to be an accordion type narrowing and expansion in that the frontier model firms release a new model and gap widens, then open source catches up and narrows it somewhat, then new breakthrough or development at frontier pushes next model far ahead again. I would expect open source models to continue to maintain or grow market share as firms mainly utilise a hybrid mix of frontier models and open source depending on the request. For example new requests would feed into the frontier model as the brain which would then determine whether to feed it out to an open source model for straightforward requirements or the most optimal frontier model for more complex issues. Gaps in reasoning (between frontier and open source) of even just 5% translates to millions of dollars of alpha for businesses vs their competitors. Some examples of this would be in the area of drug discovery and algorithmic trading where being 6 month behind cutting edge is a no starter. While I know many are predicting/hoping that all this capex is going to be wasted and that the mag 7 and Anthropic/Open AI/Spacex are going to collapse like a tower of cards, I fear they might be disappointed. Doesn’t mean their won’t be lots of volatility and various drawdowns in these stocks over coming years.

I feel like we are just at the beginning with these models and some march towards AGI and ultimately ASI over the next couple of decades. Today’s cutting edge models will look like toys compared to next years cutting edge models and this will continue for a long while yet. Only the big frontier models will have the capital and chip access to afford to stay at the bleeding edge, then open source models will constantly be behind due to this fact. Maybe the gap will narrow slightly, maybe it will get larger. And as long as this is the case, businesses who want the biggest edge on their completion will be more than willing to pay up for the best.

I feel like for stuff like coding where AI is really starting to show great promise models that are at the cutting edge will always be in high demand. So as long as tech new Claude or Open AI coding models are staying 3 months ahead of the cheaper open source models they will have loads of demand. Even though 5 months seems like a short time, the difference is quality in answers and coding from a December 2025 model and a May 2026 model is massive. Obviously if they can’t maintain this edge then it’s a different story.

Just embrace it my man. Having 10% of your portfolio in t bills earning 4-5% and the other 90% invested will have a trivial difference in your year end return compared to being 100% invested.

Very well said.

Many SAAS, Retail, and Restaurant stocks are trading at very low valuations compared to history. Many other items like Semis have gone up a lot. Whether we are in a bubble or not, who knows or cares. And let's say we are, what changes would you make to your approach? For me I will continue to hold good quality stocks and possibly add more if valuations warrant it.

Yup, I am continually blown away by how good it is and how it can do stuff in minutes that used to take me days.

Looks like the short covering is done on the SAAS names, normal order restored today.

First thing I’d suggest is to zoom out a bit, comparing year to date results with an index is pointless. What is 5 months of data going to prove. I’d be looking at your 5 year CAGR vs the S and P at a bare minimum to assess performance and even that could be inconclusive as we’ve had some very strong returns on the index this past decade. Main thing is if you enjoy active investing or you’d rather just not have to do it and let the index do the work.

Live in Europe but hold mostly US stocks. Best of both worlds.

Makes sense, you got to find the approach that maps to your personality. Large drawdowns in my investment portfolio doesn’t give me any anxiety or affect my sleep. Some random health issue or family problem on the other hand could give me the odd sleepless night.

Ya I was wondering how that was possible, must have a very conservative asset allocation. My largest drawdown was about 35% and I mostly took it well. I’ve always tried to mentally prepare myself for a 50% drawdown and I expect I’ll get one at some stage, possible more than once over a lifetime.

I strangely enjoy it. When things are going well in the markets I tend to gradually lose interest. Then when panic strikes I start to perk up. As I’ve mentioned in other threads I’ve historically carried decent sized cash balances so I am always ready to load up when others are getting skittish. I’ve never been interested in using leverage either. And lastly I have a mostly stable job and live within means. The more drawdowns you encounter the easier it gets. So just enjoy it.

Same here, just continuing to add to my existing stake. Very happy to be able to get some more at a good price.

Trimmed some Alphabet, bought some Nintendo.

Yes, I enjoyed this episode. I'd say this trend of gradually increasing token spend relative to labour spend will continue for long time and expand from early adopters to the wider corporate world. He mentions that the current token spend they pay anthropic is 25%(and growing) of total employee salary spend.

This is a very interesting article on how the future might develop for Salesforce. https://www.saastr.com/salesforce-just-launched-headless-for-ai-agents-weve-already-been-living-it-for-6-months/

Seems like a few fellow twin dads on the board. Identical twin girls for me, turning 5 next month. Best thing ever having kids. I'd echo most of the advice already mentioned, read to them, talk to them, do stupid things, keep them away from screens if you can. Don't be those parents who just give up and plonk an ipad in front of your kid when you are at a restaurant, don't be the parent who is pushing your kid on the swing with one hand, and staring at a phone in the other hand. Try to always have time for them if they come to you looking to acknowledgement, no matter how busy you are at work (I work from home, so get this a lot). Accept that you will slip up and make mistakes, just get back to being a great dad the next day. Try to be a good role model for them, they are watching and taking in everything. If you want them to grow up to eat healthy, then eat healthy food yourself, if you want them to be active, then live an active lifestyle. Try not to be a hypocrite. Anyway that's enough things that came to mind for me. Congrats and enjoy.

Ya it would have been nice to have been able to get into these companies years ago. Still if these companies live up the expectations some people have they could go on to become the new dominant firms in the market. So while a 50 or 100x would have been nice, a 5 or 10x isn’t too bad either.

I’d say 1997 vibes. We have a few more years to run yet.

I’d look at it a bit differently. Previously the large enterprise companies you listed Adobe, servicenow, Workday, had the scale and budget to spend millions on human intelligence. In the old world this was hiring very smart developers and engineers. In the new world every other company now has access to the same intelligence, but now it is in the form of tokens. I would say there is some degree of diminishing returns in that if you already have a large development team and loads of traditional resources then adding AI on top of that would improve things by a certain percentage, but for a start up looking to create a new workday solution and compete with them could catch up a lot faster than the incumbent can push ahead. Secondly for large end-customers who have their own massive development teams maybe they decide to build more custom solutions for their internal processes rather than buying off the shelf. Obviously the local golf course aren’t going to build a custom solution, but maybe Bank of America would, or maybe Google builds its own HR system rather than using workday, I believe they already have their own custom CRM solution. It’s not as black and white as it was before AI came along. Im not smart enough to know how this all plays out but I see a lot of people on one side confidently predicting that AI will destroy all SAAS companies and a similar amount on the other side confidently predicting that there is now chance SAAS companies will get disrupted.

Same I’ve always maintained a sizeable cash balance(historically has been somewhere between 25-40%), probably too sizeable if I’m being honest. Provides a good ballast to the extreme volatility in two of my largest holdings (Tesla and Bitcoin). I’ve mostly moved away from this over the past few years and am down to an all time low for me of around 7% cash. Covid crash in 2020, tech drawdown in 2022, trump tariff tantrum in 2025, and the Iran war drawdown over last few months each presented plenty of nice options for me to put the cash to work which I was happy to take.

Ya I haven't seen any specific news come out. Service Now, Atlassian, Hubspot all down 5-7%.

SAAS stocks really being taking to the woodchipper today.

Ya it's a bit strange alright. I think the main fear is that the access to those coins will cause a massive supply shock and crash the price of bitcoin, similar to if a meteor strikes the earth and that meteor contained 20% of the current earth supply of gold. Due to this new supply the existing stock would essentially be debased. Would likely be a massive drawdown in short term but maybe long term impact would be fine.