5/29/2026
AI vs. Dot-Com: Why Today’s "Shortage" is the Opposite of 2000’s "Dark Fiber"
Happy Friday!
In this week’s letters,
– Hayden Capital on AI companies and speculative behavior
– LVS Advisory on whether AI is in a bubble in comparison with the Dot-Com
– Sigil Stable Fund on Hyperliquid and crypto
– Elevator pitches for BDX, LXU and POOL
Quarter in progress: 721 fund letters of 2026 Q1 are live on our database!
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Q1 2026 INVESTOR LETTER SUMMARIES
- Even a war has not been enough to stop the nearly trillion dollars in annual spending being funneled from mega-cap technology companies to the “picks and shovels” semiconductor and hardware makers around the world.
- That said, it feels like speculative behavior is starting to creep into certain pockets of the market. Just the other day, an enthusiastic parent at my kid’s school, who works in the entertainment industry, talked, or more accurately bragged, about how memory names were up 10% that morning and asked for my thoughts on them. Sandisk’s stock price is now small talk at preschool drop-off, and that worries me.
- At a high level, I do not subscribe to the idea that OpenAI or Anthropic will eventually replace all incumbent software or internet platforms. In fact, we are already seeing evidence against that view. ChatGPT, for example, canceled its instant checkout and commerce initiative a few months ago.
- The surge in AI stocks and increased index concentration are reminiscent of the Dot-Com Bubble of the late 1990s. Optically, there are similarities. The Nasdaq rose approximately 600% from 1995 before peaking in March 2000, driven by hot stocks such as AOL and Cisco, each of which rose by several thousand percent.
- However, there are important differences between the Dot-Com Bubble and the current AI mania. First, the Dot-Com Bubble was fueled largely by hopes that the internet would eventually drive meaningful revenue. By contrast, AI products are already generating real revenue and delivering measurable benefits.
- Second, the Dot-Com Bubble featured an infrastructure buildout that was largely underutilized. By 2000, a significant portion of installed internet infrastructure was unused and referred to as “dark fiber.” Today, by contrast, there is a severe shortage of AI infrastructure across the board, including semiconductors, data centers, and electricity.
- Q1 2026 was another action-packed quarter. We saw conflict in the Middle East re-escalate, as the United States and Israel attacked the Iranian regime, which had already been weakened by previous strikes and domestic protests. During the conflict, Hyperliquid showcased its usefulness by providing 24/7 perpetuals for oil. It became the dominant price-discovery venue for oil over the weekends, when regular exchanges were closed.
- In our last letter, we said that crypto is maturing and that winners keep winning. That remains one part of the story. The other part is that the top 100 crypto assets still include many nonsensically overpriced assets, some of which are fraudulent or abandoned.
- Active and professional management of crypto exposure will therefore continue to offer a lot of value to investors, especially those who are not satisfied with holding only BTC exposure and instead want exposure to the other exciting innovations that blockchain technology offers.
ELEVATOR PITCHES BY FUNDS
Becton, Dickinson and Co. (by Hinde Group)
- Becton Dickinson expects to achieve currency-neutral revenue growth in the low single-digit range for the current fiscal year (ending in September) and adjusted diluted EPS of between $12.52 and $12.72.
- Moreover, Becton Dickinson highest priority use of free cash flow right now is buying back stock. The more stock Becton Dickinson buys at such value-accretive levels, the higher the intrinsic value per share will march.
- More than 90% of BD’s portfolio is currently achieving management’s long-term organic revenue growth target.
LSB Industries (by Robotti Value Investors)
- The closure of the Strait of Hormuz has disrupted more than just oil. Fertilizers, ammonia and other derivatives of oil and gas have also been cut off from global markets.
- LSB produces ammonia, some of which is sold in the merchant market, with the balance upgraded into nitrogen-based fertilizers and nitric acid. A growing component of the business has been this nitric acid, a key ingredient in the production of explosives.
- LSB also has the opportunity through its main facility in El Dorado, Arkansas, to capture most of the carbon currently released in its production process.
Pool Corp. (by Argosy Investors)
- Pool Corporation is the dominant wholesale distributor of swimming pool and related outdoor living products, with 35-40% market share and 456 branches nationwide; the next closest competitor has 8-10% share, but was recently acquired by Home Depot as part of the SRS Distribution transaction.
- The company now sells for 15.5x forward earnings, which seems entirely too low for a high quality market leader with strong ROICs and normally mid-single digit organic growth and future consolidation optionality.
- The company is at all-time low valuations and based on the trend could be headed lower short-term.
HIGHLIGHT OF THIS WEEK
MEDIA APPEARANCES BY BSDs
Inside Chris Hohn’s Top Hedge Fund
- Most hedge fund managers put earthly matters above the business of the soul. But then most hedge fund managers are not like Chris Hohn. His spirituality, he believes, augments his considerable investment skills.
- Hohn, 59, is perhaps the closest thing Britain has to Warren Buffett, the legendary US stockpicker, write Costas Mourselas and Amelia Pollard. His Children’s Investment Fund (TCI) has become the fifth most profitable hedge fund of all time, last year bringing in more profits after fees than any other firm.
Lingering mysteries from Berkshire’s portfolio update
- The Wall Street Journal had reported new CEO Greg Abel would be selling many or all of the stocks formerly managed by Todd Combs, who left for a job at JPMorgan late last year.
- It’s harder to explain how the two new names, Delta Air Lines and Macy’s, got into the portfolio.
- Berkshire almost never reveals who makes buy and sell decisions for individual stocks, but the rule of thumb had been Warren Buffett handled the larger positions, and one of the two (now one) portfolio managers were responsible for the smaller positions.
Chris Hohn’s quest for eternal greatness
- Billionaire Chris Hohn has intense convictions on stock picking, activist campaigns, philanthropic causes. Lately, he has added another pastime: faith.
- Today’s Big Read takes an expansive look at the billionaire investor and his hedge fund, The Children’s Investment Fund (TCI), as Hohn has arguably become Britain’s closest proxy to Warren Buffett.
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