Podcast
Alex Sacerdote - How to Invest Through Technology Cycles - [Invest Like the Best, EP.477]
Invest Like the Best with Patrick O'Shaughnessy
- Anthropic’s Enterprise Led Breakout
- Anthropic emerged as a top foundational model contender because it focused on enterprise needs and maintained engineering continuity when many startups failed.
- Whale Rock saw coding as the true revenue unlock after Claude Code became agentic and drove heavy token spend by developers. (Time 0:03:27)
- Winning Allocation With Deep Diligence
- Whale Rock won a large Anthropic allocation by building a 90-page deck using Claude to analyze the coding market and by cultivating a relationship with management.
- That hands-on diligence turned into an outsized allocation in a high-conviction private round. (Time 0:14:53)
- How Deep Modeling Landed Stripe Block
- Whale Rock secured a large Stripe block in 2020 by deeply modeling TPV and take rates despite limited public data.
- That underwriting let them buy a $100m seller block and hold into the public market. (Time 0:16:09)
- Three Part Investment Framework
- Whale Rock’s investment framework is S-curve, competitive advantage, underappreciated earnings power which lets them buy dominant tech early at low P/Es.
- They model multi-year exponential earnings growth to justify purchases like NVIDIA at 4x earnings. (Time 0:19:36)
- See Adoption Signals In Person
- Look for visual or conference signals at inflection points because data can lie during strategic shifts; go see product usage and standing-room-only sessions.
- Whale Rock uses Gartner and symposiums to spot enterprise demand before earnings show it. (Time 0:25:18)
- Trim Software Bets Until AI Adds Revenue
- Reduce legacy software exposure until AI monetization proves durable; Whale Rock sold much of its software book and was net short into 2024.
- They realloced into chips and infrastructure where adoption and TAM were clearer. (Time 0:38:11)
- AI Turned Hardware Into High Margin Growth
- AI is causing a hardware renaissance: decommoditization across PCBs, HBM, liquid-cooled racks, and networking is creating durable, high-margin suppliers.
- Whale Rock found suppliers like Celestica and Elite Materials with multiyear ASP and margin tailwinds. (Time 0:44:41)
- Rate Of Change Beats Static Share
- Rate of change in AI exposure matters more than static market share because acceleration compounds margins and growth.
- Whale Rock models shifts like 10% to 30% penetration as a structural margin inflection. (Time 0:52:13)
- Apps Come After Infrastructure Proves Out
- Application-layer winners lag the infrastructure surge because moats are unclear and apps must prove sustainable monetization.
- Anthropic and OpenAI hit escape velocity first; apps may come later when integrations and selling motions mature. (Time 0:57:48)
- Use AI To Be A Better Reporter Not A Replacer
- Use AI to automate reporting and data collection but keep analysts focused on judgment and synthesis; AI should produce better notes, not final decisions.
- Demand analysts to write the critical top-paragraph insight that AI cannot replicate. (Time 1:00:29)