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Thursday, November 5, 2026

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@convequity 4 clicks

Convequity on X

Neoclouds trade at 2.6x invested capital, less than half the hyperscalers' 6.1x The seven neoclouds in Convequity's AI Bubble Barometer (ABBX), $CRWV, $NBIS, $IREN, $APLD, $CORZ, $CIFR and $BTDR, lost 7.2% of their combined enterprise value this week, from $190.2B at the 2 Oct close to $176.5B at the 9 Oct close. Over the same week the five hyperscalers, $MSFT, $AMZN, $GOOGL, $META and $ORCL, gained 2.4%, from $13,316B to $13,637B. 1. Enterprise value divided by invested capital (EV/IC) at the 9 Oct close was 2.6x for the neoclouds and 6.1x for the hyperscalers. At the 2 Oct close it was 2.8x and 6.0x. 2. ABBX estimates the weighted average cost of capital (WACC) at 14.6% for the neoclouds and 9.7% for the hyperscalers. 3. At the 9 Oct close, neocloud share prices were 20% to 45% below each stock's best Friday close since 17 Jul: CIFR −44.5%, CORZ −33.3%, BTDR −25.8%, IREN −24.6%, APLD −24.1%, CRWV −22.0% and NBIS −20.4%. Among the hyperscalers, ORCL was 10.9% below its best, AMZN and META 4.4% and GOOGL 1.3%, while MSFT closed above its best. We think most of the discount reflects the neoclouds' higher cost of capital rather than a mispricing. We would not call 2.6x cheap until they report their July to September backlog and customer prepayment figures.
@convequity 2 clicks

Convequity on X

A laser that only one company can supply will not scale to the volumes AI needs. That is the main reason $LITE is a less attractive investment to us than it was a few quarters ago. Our post on Lumentum got more attention than we expected, so we want to set out the argument in plain terms, including what we think about microLED. We did not say microLED will certainly happen. 1. The part in question is Lumentum's ultra-high-power external laser source. In co-packaged optics, the optical parts sit inside the chip package. The laser sits outside, in its own module, and its light is carried into the package by fibre. That outside module is the external laser source. Ultra-high-power means one laser produces enough light to feed many optical channels at once. 2. If only one vendor can make that laser, it has little chance of reaching meaningful volume. One supplier cannot carry a part the whole industry needs. So the industry has to find other paths around that bottleneck. 3. The first likely path is micro-VCSELs. A VCSEL is a vertical-cavity surface-emitting laser: a tiny laser that sends light out of the top of the chip rather than out of its edge. They are made many at a time on a wafer, and each one is low power. A micro-VCSEL is a very small version. Many small lasers do the job of one very powerful one. 4. The second path is a less powerful laser packed inside the NPO package. CW stands for continuous wave: the laser emits a steady beam, and a separate part, the modulator, switches that light on and off to carry data. NPO is near-packaged optics: the optical engine sits on the board right next to the chip, rather than inside the chip package or in a pluggable module at the front of the switch. In this path the CW laser is still fairly high power, but not ultra-high power, and it sits inside the optics package instead of in a separate external module. 5. The third path is microLED. A microLED is a very small light-emitting diode, the same kind of device as in a display, not a laser. Each one is switched directly to carry data, and many of them run in parallel over short distances. 6. On microLED, the consensus on X is that it will not work for AI interconnects. We are not saying it will certainly happen. It is one of several alternatives. But there is good research work on it, and it has a chance. Most of the criticism we see is aimed at one architecture. The research we rate uses microLEDs in a different architecture, and the criticism does not address it. 7. Lumentum will still grow. But compared with the previous few quarters it is a less attractive investment, because its ultra-high-power laser is the part the industry has to find a way around. We trimmed most of our Lumentum position earlier this year, around when the share price began to flatten.
@ParadisLabs

Paradis on X

With the Singapore Grand Prix in a few hours, I can't help but draw comparisons to the financial markets and the AI trade. One slow pitstop or a miscalculated overtake can undo weeks of preparation and cost millions of dollars. So with AI and semiconductor earnings fast approaching, it feels like we need a quick pitstop to get the race back on track. Rates remain high. Oil prices are elevated. Fresh frontier lab ARR concerns. AI capex. Circular financing.....all create some dark clouds which have resulted in de-risked positioning and low sentiment. Similarly, consumer confidence is low. New research from Morgan Stanley finds that net sentiment from Americans towards AI is at +14% compared with -20% for data center construction, with water requirements and environmental concerns among the biggest objections. It therefore seems like AI policy will become an even bigger stumbling block in the years to come... But the positive is that business fundamentals have remained strong highlighted by recent sold-out comments from $MU and $LITE CEOs. Plus $TSM reporting 55% YoY revenue growth as the de-facto proxy for the wider AI trade. My beloved Chelsea won 5-1 yesterday. But conceding even just 1 goal won't be good enough for the AI trade. With sentiment at fresh lows, I feel like all the key infrastructure companies need to report without any hiccups.

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Trading Post November 5, 2026

MercadoLibre’s logistics expansion cut margins by 60 basis points, while Mercado Pago grew credit 62% with 7% NPLs.

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Cassandra Unchained 2 clicks

Intel: The CPU Comeback, Discounted

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VSH Earnings Review

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Cestrian Capital Research 3 clicks

Thursday Tailwinds #13: Nov 5, 2026

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CHWY · long

Chewy INC

Chewy (CHWY) is presented as a long opportunity after a prior 2022 short thesis played out.

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Value Investors Club 5 clicks

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