Friends,
The biggest photo-meme of the past week was this shot, taken in 2007 for a UNICEF ad. It features soccer great Lionel Messi with a newborn baby.
Fast-forward 19 years and that baby is none other than Spain's Lamine Yamal. As you already know, Yamal helped defeat Messi's Argentina in the World Cup final.
Take a trip back in time
But seeing the picture got us thinking. Messi's road to stardom is well documented -- he traveled across the Atlantic as a 13-year-old to play in Spain.
If Messi were a stock -- could you imagine being able to invest in him in 2001? With outcomes like this, the most profitable move would have been to mortgage your house, invest on margin, and go all-in on Messi.
But while being the most profitable move, would it have been the wisest?
Definitely not.
For every Lionel Messi, there are hundreds of Freddy Adus. If you had made all those moves betting on Adu's career, you would have experienced total financial losses.
Investors are betting Anthropic / OpenAI will be Messis
There is, of course, a tie-in here. Right now, many companies and investors are imagining themselves sitting in 2036 -- licking their wounds because they missed out on the next "Messi." Only instead of Messi, we're talking about OpenAI and Anthropic.
Consider:
- Hyperscalers: More than half of the $2 trillion backlog for AWS, Azure, and Google Cloud is with Anthropic and OpenAI.
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- Neoclouds: Coreweave has over $11 billion in debt coming due by the end of 2027. But it's not expected to be cash-flow-positive over that time frame. The company will likely need to refinance, and the health of Anthropic/OpenAI will loom large in the refinancing terms.
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- NVIDIA: Currently, three direct customers account for 64% of accounts receivable. Though it's unlikely this includes Anthropic or OpenAI, whoever NVIDIA is selling to is likely counting on demand from the duo.
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This is why, for instance, NVIDIA fell more than 5% on Monday. The company announced up to $750 billion in potential financing for SKHynix and OpenAI. For the former to succeed as an investment, the latter needs to also do well.
None of this is to say that the "AI trade" is doomed. Anthropic and OpenAI could show remarkable demand growth and shift to profitability (become like "Messi"). The terms of debt offerings could become more favorable. There might be minor corrections with the stocks, but nothing catastrophic.
One thing we do feel certain of: there's an element of fragility that can't be ignored. Fragility does NOT mean something will collapse. It DOES mean you have to pay it requisite respect. If you're involved in the AI trade at all (as we are), understanding this is paramount to your long-term success.
And as you know, long-term success is the only kind we focus on here.
Wishing you investing success,
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Brian Feroldi, Brian Stoffel, & Brian Withers
Long-Term Mindset
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