On "hype and FOMO" vs "being patient and long term investing"

First of all, I’m still down 50% from my all time high in Feb 2021, so you shouldn’t listen to me. Now that we have that out of the way, I do want to post something that I’m seeing around the boards and maybe convince a few of the members here that short termism is not always such a crazy thing.

It feels like the sentiment around these parts for several of the regulars is that AI is hype and to invest into the obvious first wave beneficiaries now would be succumbing to FOMO, and the noble thing to do to show how committed we are as investors is to take a long view of our SAAS companies and wait 5 years for the story to play out.

I have that reflexive reaction too - after all, the biggest and most successful investors we’ve all studied preach a “hold forever” value when it comes to time periods, and even Saul when putting together his knowledge base notes his preferred holding period is indefinitely, and in practice averages 6months to 3 years.

But I think that preference is playing against us at this moment in time. The NVDA earnings should have been a signal to all of us with heavy holdings in SAAS that our thesis is wrong. We’ve seen time and again from several of the Q1 earnings that AI is not going to benefit these companies over the next year, and that it will take a while (if ever) for the increase in compute to start showing up in revenue numbers.

Some stocks like NET have stayed buoyant because of a tangential relationship to compute and datacenters, but overall the results have shown a huge slowdown. The normal saul approach when this happens is to sell and find other places for our capital, but it’s just been so. damn. hard. to find companies to actually invest in.

Well, now we have a real example of where this AI wave will materially affect revenues, at least in the upcoming year. Yes NVDA, ASML, TSM, and SMCI has run up 250%, 94%, 71%, and 300%, respectively, from their lows last October, and the market caps are enormous for all but SMCI (this doesn’t give me as much heartburn tho, since it seems to me the chip industry, especially upstream, is near monopolistic). But to me it feels like getting into Zoom in March of 2020, after it had already run up from the 60s to around 150. It felt like hype but the stock would go on to gain another 200% (up 3x) until Q3 earnings in November when it was clear it had run out of steam.

Yes the bubble will definitely pop as many have pointed out, but we have clear evidence now that until it does, revenues and net incomes of these companies will grow tremendously. I have trimmed or exited many of my SAAS positions (from about 35% last week before NVDA earnings to now 10%), and have put that across ASML, TSM, and SMCI. That’s probably not aggressive enough and I should pull capital from other parts of the portfolio too. I’m not as brave as Rob or jonwayne and I can’t commit 70% of my portfolio to one trend, and I don’t know which of them will do the best (I suspect SMCI since it’s much smaller at 11B and has more price momentum currently), but it feels like an inflection point that we should not ignore.


I agree with your sentiment, but I’ve struggled to translate the visceral instinct to try and capture some alpha from these companies into an objective criteria for entry and building positions.

The one thing I took away from The Big Drawdown (for me this was precipitated from Nov '21) was to stick to a defined plan and employ better risk management. which I won’t necessarily go into here as it involves technicals and this is not encouraged on the board (forbidden?)

Technicals aside, if you had NVDA, ASML, TSM, SMCI on your watch list, would you tax harvest your losses (or tax taxable gains if you were lucky enough to be in pre-pandemic) in CRWD, NET, DDOG, SNOW, etc. and go all in (this is rhetorical as you’ve already mentioned that you’re not necessarily ready to go ‘all in’ one a particular trend)? I’m not sure I have that courage either.

For now, I’m trimming and tax-harvesting some of my traditional SaaS companies but still staying long and several that have fallen out of favor here. I’m also as bullish as ever on several of the cyber security companies which report later this week. I see no rush to ‘rush in’ to ASML, TSM, SMCI, AEHR until the broader market trend is stronger, and will potentially build positions up over time as I craft my criteria. No doubt, if these are the true winners, I’ll lag the returns of some of our fellow board members but it’s acceptable to me and my risk tolerance.


Thanks for your sharing.
Perhaps I’m mistaken, but I prefer to follow the trends and not follow the news. Usually, when the news keeps talking about something, I tend to step back and observe.


Add this to (not Compare this to) the reasoning in Smorgasbord’s past couple posts.

I’m looking forward toward where the market is going and trying not to be reactionary.

Smorgasbord-(what’s in parentheses mine)
The first wave is chips, second wave is infrastructure & devices, and then the last wave, which is the largest wave, is the software and services sector.
While I believe this won’t straightforwardly map to the AI world (what new devices are needed and Infrastructure is the server-side deployment of the GPUs), I do think that we’re just starting to see what the software and services side of AI will be - and that it will eventually be bigger than the chips/infrastructure side.
That would mean: Nvidia today for Wave1 for Chips, Infrastructure companies like SMCI, (me: Cloudflare32%), AWS, Azure, GCP, (me:Tesla33%) etc. for Wave2, and then the software companies (me: Snowflake16%, Monday.com16% and again Cloudflare and Tesla). So, some patience might be warranted, or one could invest more in wave1 and wave2 companies today, being ready to move into the software side in a year or so(Wave3).