🛒 Don't trade the theme, trade the shortages along the way
Envision the future
The future is all compute (LLM brains) and cybernetics (rare earth minerals). Don't trade the theme, trade the shortages along the way. By shortages, not what is actually short, but what people think is short. Also, cybersecurity.
- a number that prints — something announced every quarter
- a big liquid vehicle — they can't buy a $500M contractor
- a sentence a novice repeats — "AI needs power"
- a trigger — a CEO says it on a call
AI CapEx had all four
- chips were short → NVDA said supply → money went to memory & optics
- compute got built → hyperscalers said power → money went to utilities, gas, uranium
- power is being built → turbine makers now say... ← this is the one to listen for
Chips -> Optics & Networking -> Power -> Utilities
- Grid (not generation)
- People who build them
- Natural gas
- Cooling
- Memory HBM
- Copper
Power — three separate trades. Generation, grid, and fuel behave completely differently. Grid is tightest.
Earth minerals — hard to express. Copper yes. Rare earths are an opaque market China controls
Batteries – grid storage demand, not battery manufacturing commodity
Robotics/cybernetics — picks and shovels components — actuators, precision gearing, sensors, machine vision
A Keynesian beauty contest.
Copper. Be ready for robotics.
Where I changed my mind
The CapEx punishment is ridiculous — but I was wrong that I should buy the dip, because the public is a beauty contest. They are punishing CapEx spending. That's possibly a very, very early indicator that this will slow down. We were wrong, though. You should not buy the dip.
I feel like we should be following the herd. We should be a traveling carny, and we should be selling tickets to people. We shouldn't be trying to hold to some higher form of truth. It doesn't really matter if Google's CapEx spend is good. It matters to the public that they're going to be punished. We don't want to take that price cut.
Bearish the hyperscalers. Long the suppliers.
This is a journal entry, not advice. I am not a financial adviser and hold no licenses; nothing here is a recommendation to buy, sell, or hold anything, and nothing here is a claim about what anyone else should do. The full legal terms and the trading record these were written against are on the front page.