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| <img src="https://images.unsplash.com/photo-1600992446626-e3d8100a878f?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3w1NzIzMjF8MHwxfHNlYXJjaHwxfHxhaV8yMDI1LTA3LTA0XzF8ZW58MHwwfHx8MTc1MTYzMTEyMnww&ixlib=rb-4.1.0&q=80&w=1080" alt="ai_2025-07-04_1 Banner"> | |
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| <h1 id="ai-weekly-value-investor-memo">AI Weekly Value Investor Memo</h1> | |
| <h3 id="week-of-july-1st-2025">Week of July 1st, 2025</h3> | |
| <hr /> | |
| <h2 id="0-market-context-sentiment">0. Market Context & Sentiment</h2> | |
| <p><strong>Macro & Sentiment:</strong><br /> | |
| This week, investor sentiment in the AI sector remains broadly bullish, underpinned by continued enterprise adoption and “picks and shovels” investment themes. Headlines focus on the scaling of AI towards Artificial General Intelligence (AGI) and hype cycles driven by big checks for vertical SaaS startups and infrastructure vendors. No single transformative event, but sustained high valuations, strong VC focus on “AI-native” startups, and large checks pouring into cybersecurity and legal GTM plays. Amid frothy valuations, institutional players (SoftBank, Big Tech) double down on infrastructure and ecosystem strategies over direct “brain” competition.</p> | |
| <p>Key macro trends: | |
| - Rising data center demand, with local partnerships (Omaha) echoing US reshoring and digitization. | |
| - Regulatory posture remains ambiguous—no new moats from regulation, but AI safety and compliance themes prominent. | |
| - Cyclical hype for AGI but little near-term fundamental change. | |
| - Venture market bifurcates: mature infra stocks pop while newer AI SaaS valuations are punchy, not value-oriented.</p> | |
| <hr /> | |
| <h2 id="1-key-value-signals-this-week">1. Key Value Signals (This Week)</h2> | |
| <ul> | |
| <li><strong>Infrastructure Over Apps:</strong> Forbes, TechCrunch, and several VC sources stress infrastructure (“picks & shovels”) wins: Nvidia, AMD, Arista Networks. Underlying: new data center buildouts are where margins and moats are consolidating.</li> | |
| <li><strong>Big Funding, High Valuation Startups:</strong> Multiple $300M Series E rounds at $5B valuations (Harvey AI, Abridge); notable, but reflect more exit-hunting than deep value.</li> | |
| <li><strong>SoftBank AI Ambitions:</strong> SoftBank signals multi-phase, multi-location investments in ASI (Artificial Super Intelligence) infrastructure, not “hot” consumer apps.</li> | |
| <li><strong>Apple Chasing Leading Models:</strong> Rumors of Apple exploring partnerships with OpenAI and Anthropic for Siri enhancement.</li> | |
| <li><strong>Cybersecurity Demand:</strong> AI investment is driving new security solutions; sector heating up.</li> | |
| </ul> | |
| <hr /> | |
| <h2 id="2-stocks-or-startups-to-watch">2. Stocks or Startups to Watch</h2> | |
| <h3 id="infrastructure">Infrastructure</h3> | |
| <ul> | |
| <li><strong>Arista Networks (ANET):</strong> Under the radar, strong FCF, high ROE, reasonable P/E (~30), and riding AI data center build.</li> | |
| <li><strong>Super Micro Computer (SMCI):</strong> Hardware picks & shovels, high revenue growth, yet P/E and P/B are both lower than high-flying AI SaaS, FCF positive.</li> | |
| <li><strong>Vertiv Holdings (VRT):</strong> Power/cooling for AI data centers, high operating margins, FCF, tailwinds from capex cycle.</li> | |
| </ul> | |
| <h3 id="ai-driven-cybersecurity">AI-Driven Cybersecurity</h3> | |
| <ul> | |
| <li><strong>SentinelOne (S):</strong> Recently turned cash flow positive, but price high—watch for dips.</li> | |
| <li><strong>Crowdstrike (CRWD):</strong> Pricey, but moat is growing, sectoral tailwinds.</li> | |
| <li><strong>Small Caps:</strong> Flashpoint and startups surfaced in cybersecurity coverage—potential acquisition targets.</li> | |
| </ul> | |
| <h3 id="newer-less-observed-startups">Newer, Less-Observed Startups</h3> | |
| <ul> | |
| <li><strong>Lovable:</strong> On track for $150M at $2B—early, but if growth justifies valuation, could be a midterm play if multiples contract.</li> | |
| <li><strong>Gruve (tech consulting AI):</strong> High-growth, vertical AI consulting. Private, but watch for eventual IPO or acquisition.</li> | |
| <li><strong>Metaview:</strong> Google Ventures-backed AI for interview/recruitment; market is early but growing.</li> | |
| </ul> | |
| <h3 id="legal-medical-ai">Legal & Medical AI</h3> | |
| <ul> | |
| <li><strong>Harvey AI, Abridge:</strong> Both received massive late-stage rounds. High valuation-to-revenue ratios. Watch for longer-term public market readiness or cooling-off.</li> | |
| </ul> | |
| <hr /> | |
| <h2 id="3-what-smart-money-might-be-acting-on">3. What Smart Money Might Be Acting On</h2> | |
| <ul> | |
| <li><strong>Follow the Infra CapEx:</strong> Hedge funds and institutions likely overweighting core infrastructure—semis, networking, power, storage—where margin, volume, and defensible moats (via high switching costs or regulatory inertia) exist.</li> | |
| <li><strong>Avoiding Overhyped SaaS/Vertical Plays for Now:</strong> Recent late-stage venture rounds suggest IPO ambitions but present frothy valuations—a signal to wait for broader tech multiple contraction.</li> | |
| <li><strong>Vulture Mode on Early AI Cybersecurity:</strong> Acquisitive public cos may shop among underfunded cybersecurity startups as hype cools.</li> | |
| <li><strong>Monitoring Apple’s Moves:</strong> Any deal with OpenAI/Anthropic for Siri would shift market sentiment and spark M&A or partnership runs in vertical AI.</li> | |
| <li><strong>Asian Market Infrastructure Approaches:</strong> With lower “blitzscaling” and more focus on fundamentals (SoftBank, Asia model), look for undercovered APAC infra names with value metrics.</li> | |
| </ul> | |
| <hr /> | |
| <h2 id="4-references">4. References</h2> | |
| <p>Cited news articles, notable for context: | |
| - <a href="https://www.forbes.com/sites/rscottraynovich/2025/07/01/inside-the-ai-hype-cycle-whats-next-for-enterprise-ai/">Inside The AI Hype Cycle: What’s Next For Enterprise AI? - Forbes</a> | |
| - <a href="https://www.rcrwireless.com/20250630/ai-infrastructure/softbank-artificial">SoftBank aims to lead artificial super intelligence era - RCR Wireless News</a> | |
| - <a href="https://www.startupecosystem.ca/news/apple-explores-anthropic-and-openai-for-siri-ai-enhancement/">Apple Explores Anthropic and OpenAI for Siri AI Enhancement - Startup Ecosystem Canada</a> | |
| - <a href="https://www.forbes.com/sites/chuckbrooks/2025/06/27/surging-investments-in-ai-are-transforming-cybersecurity/">Surging Investments in AI Are Transforming Cybersecurity - Forbes</a> | |
| - <a href="https://www.forbes.com/sites/richkarlgaard/2025/07/04/venture-gapital/">Venture Gapital - Forbes</a> | |
| - <a href="https://techcrunch.com/2025/06/27/startups-weekly-tech-and-the-law/">Startups Weekly: Tech and the law - TechCrunch</a> | |
| - <a href="https://www.startupecosystem.ca/news/lovable-ai-startup-on-track-to-raise-150m-at-2b-valuation/">Lovable AI Startup on Track to Raise $150M at $2B Valuation - Startup Ecosystem Canada</a></p> | |
| <hr /> | |
| <h2 id="5-investment-hypothesis">5. Investment Hypothesis</h2> | |
| <h3 id="core-thesis">Core Thesis</h3> | |
| <p><strong>Value is centered in infrastructure providers—hardware, networking, power, and core security—catering to the real, growing CapEx demand of AI buildout. Avoid vertical SaaS and “hot” application startups unless multiples meaningfully contract or unique moats emerge.</strong></p> | |
| <p><strong>Rationale:</strong><br /> | |
| - AI infrastructure remains the largest, highest-margin, most defensible section of the ecosystem, with strong fundamentals (low P/E, high ROE, FCF-rich) and clear secular tailwinds. | |
| - Application layer (AI native SaaS) is flush with VC cash, driving up valuations, and has a high “hype/actual value” risk unless real-world defensible moats or sticky enterprise contracts are evident. | |
| - Smart money is playing infrastructure, not moonshots in AGI or narrow applications—at least until the next wave of down valuations.</p> | |
| <h3 id="strategy">Strategy</h3> | |
| <ul> | |
| <li><strong>Overweight:</strong> Data center, networking, and power infrastructure (ANET, SMCI, VRT).</li> | |
| <li><strong>Underweight/monitor:</strong> Late-stage application-layer startups (Harvey, Abridge, Lovable) for valuation resets.</li> | |
| <li><strong>Watch list:</strong> Early AI cybersec, APAC infrastructure with value metrics, Apple partnership signals.</li> | |
| <li><strong>Regulatory angle:</strong> Unlikely to drive new barriers-to-entry/moats this cycle; invest in moats built on high switching costs or network effects.</li> | |
| </ul> | |
| <hr /> | |
| <p><strong>Conclusion:</strong><br /> | |
| This is a “follow the pipes, not the flowers” moment. Let VCs chase $5B AI SaaS rounds—the best value lies in asset-light infrastructure plays with strong balance sheets, high returns on equity, and multi-year secular tailwinds.</p> | |
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| <h3>🧠 Metrics</h3> | |
| <ul><li>Topic: AI</li><li>Articles Collected: 116</li><li>Generated: 2025-07-04 14:12</li></ul> | |
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