The Few Bets That Matter
Concentrated Equity Investor, AI Infrastructure
AI is becoming a cash-generation tailwind for SaaS companies, as Snowflake shows. Falling token prices let them add AI for minimal or controlled spending, producing packaged services with controlled margins and rising revenue, a recipe for more cash and shareholder returns, which is what the market now rewards. Hardware names like TSMC and NVIDIA already fit that profile, while Alphabet, Microsoft and Meta are slowing cash generation and planning to raise share counts. x.comÂ
Adobe and Duolingo's selloff is justified because AI is better and cheaper at solving the pain points SaaS companies were built to address, even understanding context. SaaS earned premium multiples for two decades as the only economic way to solve structural problems, producing safe, recurring cash flow. With that edge eroding, names that look cheap risk becoming value traps without a catalyst for growth or cash generation. The software ETF is down 25% since January, and Duolingo about 40%. x.comÂ
Snowflake is evolving from a cloud data warehouse into the default data and AI control plane for large enterprises, an inflection the market misses by treating it as a maturing former hypergrowth name. The shift shows in customer commitments, workload expansion and platform centrality, supporting a credible path to $500. @buccocapital notes a customer rebuilt Gainsight on Snowflake in five hours, suggesting it may be the assailant in the SaaSpocalypse rather than a victim. x.com x.comÂ
Snowflake doesn't deserve to be caught in the SaaS selloff because AI is accelerating its business rather than disrupting it. CEO Sridhar Ramaswamy says Cortex Code, its data coding agent launched nine weeks ago, is already used by 50% of customers, making it the fastest-adopted product Snowflake has launched. Early adopters increased their Snowflake consumption by 11% on average. x.comÂ
AI agents are starting to do for free what Snowflake and other cloud software companies charge subscriptions for, erasing their pricing power. The same AI is a revenue engine for chips, as infrastructure spending flows through Nvidia, AMD and TSMC hardware. The split shows in markets: SOXX is up 25% from its March low while WCLD fell 5% and Snowflake 8.4%. x.comÂ
Buying software stocks is the way to position against AI hype, since the AI narrative has devalued them. AI looks massively overhyped and its valuations cannot prove out, but shorting is impractical with volatility premiums this high. Agreeing with @RealZoltanT that SaaS is the best long if you want to be short OpenAI and Anthropic, SaaS is set to rip. x.com x.com x.comÂ
Snowflake remains headed to $390 a share by end-2027 because investors have yet to fully realize it benefits from AI rather than being disrupted by it. It guides for 31% growth and roughly $1.5B of free cash flow, moving toward $2B a year. Buying before the market latches onto that narrative captures the easy money, while waiting for market clues means trailing the market. x.comÂ
Snowflake's valuation looks full after more than doubling since May on an AI inflection story, given five years of promised inflections that didn't materialize. Stock-based compensation remains heavy at $1.6B against FY2026 revenue of $4.7B, though dilution has been kept in check lately. At about 23x EV/revenue, or 19x forward, it sits near the top of its 2-3 year range. A Databricks IPO could make investors see Snowflake as old relic tech. x.com x.comÂ
Snowflake is showing real AI-driven sales acceleration, and analysts questioning its buybacks and 2028 earnings guide misread it. Net revenue retention is 126%, @WisemanCap notes AI workloads carry higher gross margins than traditional ones, and management sees a $460B TAM by 2031. SBC fell from 50% of revenue to 29% last quarter and could be about 20% in a year; at under $90B EV it trades at 9-10x next year's revenue. Not cheap, but top line and margins drive free cash flow. x.com x.com x.com … Show more
Alphabet's AI spending is visibly turning into revenue, more than many other names can say today. Cloud is nearly a quarter of revenue, growing 103% at a 36% operating margin with a $561B backlog; total revenue rose 25%, operating income 30%, and margins are expanding. Free cash flow has been negative for two quarters, capex keeps climbing into 2027, and AI leaves search monetization uncertain. x.comÂ
Snowflake now looks really expensive against a $180-200 valuation, even though the business remains strong. It is growing around 30% and pushing hard into AI with its cloud data solutions, which could drive strong growth for years. x.comÂ
Snowflake is overlooked AI infrastructure because every enterprise AI model needs clean, governed data to run on. It has 126% net revenue retention, $9.77 billion of contracted future revenue and 813 of the world's 2,000 largest companies as customers. x.comÂ
