Hi All,
Welcome to our brief overview of portfolio news from the past few days.
Alphabet’s Big Week: The Apple Deal & Personal Intelligence
Alphabet is solidifying its dominance with two major developments that validate its technology and leverage its ecosystem
The Apple Deal: Apple and Google have entered a multi-year collaboration. The next generation of Apple Foundation Models (powering features like Siri) will run on Google’s Gemini models, with Apple reportedly paying $1 billion annually. This is a huge win for Google and the ultimate validation of who has the best AI stack. Google is now effectively paying ~$20B for distribution (Search) while Apple pays ~$1B for the Gemini models. It’s a symbiotic lock-in. Apple buys time to perfect its tech without sacrificing user experience, while Google secures its position as the infrastructure backbone for the world’s premium device ecosystem.
Personal Intelligence: Google launched Personal Intelligence for Gemini in beta. This feature securely connects the AI to your apps—Gmail, Photos, YouTube—to provide answers based on your specific context. This leverages Google’s true unfair advantage: Distribution + Data. By using your data from Gmail, YouTube, and Search, they can provide a personalized experience that standalone chatbots simply cannot match.
Meta’s Pivot: A Wild Ride Ahead
Meta is undergoing a massive capital reallocation, shifting focus from the Metaverse to pure Compute.
Meta Compute: Zuckerberg announced Meta Compute, a top-level initiative to build tens of gigawatts of infrastructure this decade. This is a massive CAPEX initiative—on top of what Meta is already spending—that will take years to play out. It is a huge bet that the demand for personal superintelligence will justify an infrastructure bill of this magnitude. Shareholders should expect a wild ride ahead as free cash flow comes under pressure to fund this vision.
Reality Labs: According to Bloomberg Meta plans to cut 10% of jobs in Reality Labs. This segment has annualized operating losses of around $18B and has torched over $50B since 2021. We doubt Meta will ever see a sufficient return on investment for Reality Labs. Seeing the company shift resources to AI infrastructure while cutting here serves as confirmation that the original bet is not paying off. As Zuckerberg commits to expanding compute, we expect further cuts to this division.
The AI Supercycle: TSMC Confirmation
If anyone doubted the longevity of the AI trade, TSMC just silenced them. TSMC beat Q4 expectations ($33.7B revenue) and guided for a ~40% revenue growth in Q1 2026.
We are entering 2026 with no signs of investments in AI infrastructure slowing down. It is hard to support the narrative that the AI Bubble will burst anytime soon when the actual builders are guiding for ~40% growth.
Regulation & Trade: The China Chip Dance
The geopolitical landscape for Nvidia and AMD remains complex. The U.S. Department of Commerce stated it will allow limited exports of chips like the H200 and MI325X to China, provided U.S. demand is met first. However, reports indicate Beijing may instruct customs to block these imports anyway to support domestic alternatives and encourage local innovation.
Other Key Updates
AWS Sovereign Cloud: Amazon launched its European Sovereign Cloud with a $9.1B investment in Germany. This is a defensive moat against EU regulation, ensuring European data stays in Europe.
Wing Expansion: Alphabet’s Wing is expanding drone delivery to 150 more Walmart stores, with a plan to scale to 270 locations by 2027.
That’s a wrap. See you soon.