| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | 6.02% |
CDT Capital Management is preparing for significant market turbulence for the first time in firm history, implementing enhanced hedging through put options on the technology sector (0.33% of assets) while maintaining cash reserves. The manager views AI as a bubble comparable to the Dot Com era, with infrastructure spending reaching $650-800B in 2026 but backed by unsustainable economics. OpenAI's leaked financials show -$21B operating losses on $13B revenue, while Meta is squandering $125-145B on AI with no verifiable results. Semiconductors now represent 19.7% of S&P 500 weightings and are expected to contribute 40% of index earnings growth, creating severe vulnerability when AI spending resets. The portfolio is deliberately AI-agnostic, with healthcare as the largest sector at 33% of assets, capitalizing on demographic tailwinds and valuations well below market. The fund returned +6.02% year-to-date through June 2026, outperforming during recent volatility while positioned defensively for expected turbulence ahead.
The AI infrastructure boom represents a systemic bubble with unsustainable economics that will inevitably collapse, requiring defensive positioning through enhanced hedging while maintaining long exposure to AI-agnostic sectors like healthcare that offer demographic tailwinds and attractive valuations.
Manager expects an inevitable AI bubble bust comparable to the Dot Com crash, when Nasdaq declined -78% from its high. The firm is preparing for significant market turbulence through enhanced hedging while maintaining confidence in AI-agnostic portfolio positioning, particularly in healthcare. Despite bearish macro view, manager expects to continue generating strong results by finding value in corners of the market with little public attention and avoiding direct AI supply chain exposure.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 31 2026 | 2026 Q2 | META, MSFT, MU, NVDA, UBER | AI, Biotechnology, Bubble, healthcare, Hedging, risk management, semiconductors, technology | - | CDT implements first-ever defensive hedging against technology sector, viewing AI as an unsustainable bubble with OpenAI burning -$21B annually and Meta wasting $125-145B with no results. Semiconductors at 19.7% of S&P 500 face earnings bust when capital discipline returns. Portfolio positioned AI-agnostic with 33% in healthcare, capturing demographic tailwinds at attractive valuations while insulated from inevitable AI reckoning. |
| Apr 30 2026 | 2026 Q1 | SOXX | AI, earnings, Insider Sentiment, semiconductors, technology, valuation | - | CDT delivered 4.36% in April by following insider sentiment signals to position aggressively before the market's 10.4% surge driven by exceptional earnings growth and semiconductor strength. With insider sentiment now dimming at higher prices, the manager has normalized reserves while warning about elevated 28x valuations and preparing to harvest gains from recent volatile positioning. |
| Jan 5 2026 | 2025 Q4 | SP500TR, ZBRA | alpha, CashFlow, Insider, Quality, risk management | - | CDT delivered 18.6% net returns in 2025, extending their five-year alpha generation streak through disciplined insider-driven stock selection and quantitative risk management. Their two-layer risk system enabled opportunistic deployment during market volatility while maintaining protection. Despite concerns over private credit risks and AI constraints, strong insider sentiment supports current 13.5% cash positioning entering 2026. |
| Oct 6 2025 | 2025 Q3 | META, NVDA, PLTR | AI, Bubble, Cash, Insiders, risk management, Valuations | PLTR US | CDT's manager warns that risk is too expensive with markets at Dot Com bubble-like valuations and AI stocks trading at dangerous multiples. Corporate insiders are selling while retail investors chase momentum. The fund is building cash reserves toward mid-teens levels, positioning defensively until better risk-adjusted opportunities emerge in the market. |
| Jul 31 2025 | 2025 Q2 | AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA | Data, Labor, quantitative, technology, Trade | - | CDT's quantitative strategy outperformed year-to-date despite July lag, using proprietary insider sentiment and alternative labor data to navigate markets. Trade deal relief boosted markets but massive BLS job revisions exposed economic weakness. Insider activity flatlining since May signals defensive positioning ahead. Mag 7 concentration creates systemic risk at 31% of S&P 500. |
| Mar 31 2025 | 2025 Q1 | - | inflation, insider activity, Long-only, Market Correction, reserves, risk management, volatility | - | CDT Capital Management outperformed during March's market correction by following insider buying signals and managing cash reserves dynamically. Their CDT 7 insider-focused portfolio gained 4% year-to-date while the Magnificent 7 fell 15.8%. The fund deployed capital from 27% to 18% cash as insider activity increased during the correction, demonstrating their systematic risk management approach. |
| Jan 5 2025 | 2024 Q4 | AAPL, SPY, T, TSLA | AI, Concentration, ETFs, Insider Trading, risk management, Valuations, value | - | CDT identifies market commonsense crisis with Mag 7 trading at unsustainable AI-driven valuations while passive ETF flows create dangerous concentration bubble. Quantitative models show 70% correction probability. Manager positions defensively with 16% cash while finding value in insider-favored stocks across 40 holdings yielding 8.2%. Strategy buffers downside while capturing upside from undervalued opportunities. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIManager views AI as a bubble comparable to the Dot Com era, with AI infrastructure spending reaching $650-800B in 2026 (2-2.5% of US GDP). OpenAI's leaked financials show $13B revenue against -$21B operating losses (-160% margin), raising questions about sustainability of $1.3T infrastructure commitments. Manager expects an inevitable AI bubble bust that will significantly impact markets. |
OpenAI Infrastructure Bubble Valuations Spending |
SemiconductorsManager expects a severe semiconductor earnings bust as AI spending resets. Semiconductors now represent 19.7% of S&P 500 weightings at record highs, with Nvidia and Micron alone at 8.6%. The sector is expected to contribute 40% of index earnings growth, making it vulnerable when AI capital discipline returns. Historical parallel drawn to Nasdaq's -78% decline during last bubble. |
Nvidia Micron Cyclicality Earnings Valuations | |
Data CentersManager flags significant risk in data center debt financing, with Morgan Stanley estimating $500B in debt to be raised in 2026 after $125B in 2025. Concerns center on potentially superfluous builds tied to AI infrastructure that may not generate expected returns, creating financial system tail risk. |
Debt Infrastructure Overbuilding | |
CloudOpenAI's shift to consumption-based pricing for enterprise customers has been rejected by the market, with customers like Uber burning through entire 2026 AI budgets by April. Lower-cost open-source competitors like DeepSeek are narrowing performance gaps, pressuring pricing and contributing to market share losses for established players. |
Pricing Competition Enterprise | |
BiotechnologyManager has positioned healthcare as the largest sector exposure at over 33% of fund assets, viewing it as AI-agnostic with strong demographic tailwinds. The US population shows 1-in-5 Americans over age 65 at record levels, driving medical care demand. Valuations are well below market and recent history, representing an information arbitrage opportunity where insiders are buying. |
Demographics Aging Valuations Insiders | |
Risk AppetiteFor the first time in firm history, manager is preparing for significant market turbulence and has purchased put options on technology sector (XLK) representing 0.33% of assets as insurance. This represents a temporary tactical deviation from long-only DNA, reflecting highly unusual circumstances and synchronizing concerns across AI ecosystem. |
Hedging Volatility Defensive | |
| 2026 Q1 |
SemiconductorsSemiconductor stocks led the market surge with the PHLX Semiconductor Index rising 38.4% in April and SOXX gaining 40.4%, its largest monthly return in 25 years. AI research labs and cloud computing hyperscalers are driving fierce competition for capacity, creating a demand tailwind expected to continue through 2027. |
AI Cloud Semiconductor Cycle Data Centers |
EarningsQ1 earnings growth has been exceptional with 84% of S&P 500 companies beating EPS estimates and collectively on pace to grow earnings by over 27% versus Q1-2025. The manager emphasizes that earnings growth is the key ingredient that keeps stock prices going higher as company values are directly tied to earnings generation. |
Growth Quality | |
Risk AppetiteCDT held its lowest portfolio reserves since COVID-19 going into April, positioning that felt uncomfortably defiant against daily headlines about economic calamity. Following corporate insider sentiment, this aggressive positioning proved successful as markets surged, though reserves have now returned to normal levels reflecting increased risk landscape. |
Liquidity Volatility | |
| 2025 Q4 |
AICDT has incorporated AI into day-to-day operations through partnership with DNSC.AI to enhance their insider activity edge. However, they express concern about AI growth constraints including resource limitations for data center construction and financial constraints that could halt AI company growth altogether. |
Artificial Intelligence Data Centers Growth Constraints |
Private CreditCDT identifies private credit accounting as a major systemic risk, noting that manager compensation tied to self-determined asset values creates massive distortions. They highlight how Apollo and KKR mark identical loans at significantly different values, with the market potentially growing to $3T by 2028. |
Private Credit Systemic Risk Asset Valuation | |
| 2025 Q3 |
AIManager expresses concern about AI investment bubble, citing excessive valuations and circular vendor financing. Questions sustainability of current AI spending levels and compares current market dynamics to Dot Com bubble. |
Artificial Intelligence Bubble Valuations Investment |
Risk AppetiteManager observes elevated risk appetite in markets with investors going all-in on AI and growth stocks. Notes that risk is now expensive with negative excess earnings yield versus treasuries. |
Risk Premium Valuations Market Sentiment Excess Yield | |
ValuationsMarket trading at 28x cycle-adjusted earnings with negative excess yield versus treasuries. Manager compares current environment to Dot Com bubble and emphasizes that risk is too expensive. |
Excess Yield CAPE Buffett Indicator Overvaluation | |
| 2025 Q2 |
Trade PolicyTrump administration trade agreements with Japan, South Korea, and EU provided market relief. EU settled for 15% tariff rate versus feared 30-50% range. Markets cheered not because they endorsed policies but because they were relieved from worst-case scenarios. |
Tariffs Trade EU Japan Korea |
Data PrivacyCDT emphasizes data integrity as crucial for quantitative strategy success. BLS data management problems highlighted with massive job revisions. Proprietary insider sentiment data and continuing jobless claims provide better economic indicators than flawed government surveys. |
Data BLS Surveys Integrity Analytics | |
| 2025 Q1 |
Risk AppetiteManager uses insider activity as a key signal for market risk assessment and positioning. When insider purchase activity declined in January-February, the fund moved to a defensive 27% cash position. As insider activity increased during the March correction, they deployed capital and reduced reserves to under 18%. |
Insider Activity Risk Management Market Timing Defensive Positioning Liquidity |
VolatilityThe S&P 500 dropped over 5.6% in March and entered correction territory with a 10% decline from February highs. The Nasdaq fell over 10.4% for its sharpest monthly decline since December 2022. The fund's reserve strategy acts as a shock absorber during periods of market volatility. |
Market Correction S&P 500 Nasdaq Shock Absorber Reserves | |
InflationConsumer inflation expectations jumped to 4.9% from 4.3% the previous month, well above the Federal Reserve's 2% target. Concerns over tariff-paralysis and stickier inflation challenged investor confidence in an expensive market, contributing to the March correction. |
Consumer Expectations Federal Reserve Tariffs Market Confidence | |
| 2024 Q4 |
AIManager views AI as transformative technology but believes market expectations have become unhinged, creating spectacular valuations for Mag 7 companies. While AI will change the world, the math doesn't support current stock prices, particularly for Apple which lacks a robust AI platform. |
Artificial Intelligence Valuations Technology Bubble Mag 7 |
ETFsPassive investment strategies through S&P 500 ETFs are creating forced groupthink and concentration bubble. The S&P 500 is now most concentrated ever with top 10 companies at 36% weighting, creating positive feedback loop that breaks the index. |
Passive Investing Index Concentration Market Cap Weighting Feedback Loop SPY | |
Risk AppetiteMarkets exhibit extreme risk-taking behavior with examples like Fartcoin reaching $1.5B market cap. Animal spirits are bucking with margin debt rising $85B in single month post-election, indicating normalized extreme financial risk-taking. |
Animal Spirits Margin Debt Speculation Crypto Gambling | |
ValueManager finds tremendous value in non-Mag 7 stocks where insiders are actively purchasing shares. Portfolio has weighted earnings yield of 8.2% with CDT 7 holdings offering better value and faster growth than Apple while trading at much lower valuations. |
Earnings Yield Insider Buying Undervaluation Contrarian Fundamentals |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct 6, 2025 | Fund Letters | David Papson | PLTR US | Palantir Technologies Inc. | Information Technology | Systems Software | Bear | NYSE | AI, government contracts, Multiples, Overvaluation, Risk, Software, valuation | Login |
| TICKER | COMMENTARY |
|---|---|
| MSFT | Through a series of capital raises, Microsoft has invested an estimated $10-20B in OpenAI and owns north of 25% of the company, but not all of the equity investments Microsoft has made to OpenAI came in the form of cash. Instead, they bartered equity for expensive credits that OpenAI can use at Microsoft's data centers for training and running their complex models. Reasonably, these credits are subsidizing the -$21B in losses, which raises another question, what do these financials look like without help from partners? |
| META | Meta is at it again. After squandering approximately -$80B on the metaverse, the firm is parlaying that failure by once again squandering money on AI. This time the stakes are reaching new highs. In 2026, AI related capital expenditures are expected to reach approximately $125–145 billion, yet there is no verifiable evidence that any of this spend is yielding results. In fact, there is mounting and damning evidence to the contrary. Meta's Llama frontier AI models are not at the frontier of the AI race and external adoption has been extremely disappointing for shareholders fronting the multi hundred-billion-dollar bill. Even Meta's own employees do not use the models that they create! In a somewhat confusing and embarrassing sign, Meta, which is supposedly creating the best AI models in the world, was recently told by Google that it would be restricting its prolific use of its AI model, Gemini. This must be the most damning evidence for a corporate failure possibly in American history, even Meta does not use its own models. It is clear that there is a fuzzy vision for an AI strategy at Meta, but the lack of leadership and execution has left it permanently behind in the race. That is likely why the firm is starting to pivot from its position as AI developer to hyperscaler. In yet another indirect omission of failure, rumors this week that Meta is exploring building a cloud business to rival the likes of Microsoft, Oracle and Amazon. Management has overbuilt their infrastructure for an AI model that no one uses (not even themselves) and now has to come up with a Plan B, which is arguably going to be just as difficult to execute as Plan A. With the cash flow of the business expected to be close to nil if not negative this year, shareholders should not and are likely not going to tolerate more pain ahead. It is increasingly obvious that Meta will have to adjust its capital plans and that is a major problem for the next group our next group of companies. |
| NVDA | In the top ten of the S&P 500 constituents, Nvidia and Micron alone now represent approximately 8.6% of the total market index, while the rest of the semiconductor sector as a group represents a record high of 19.7% of the market index's weightings. |
| MU | In the top ten of the S&P 500 constituents, Nvidia and Micron alone now represent approximately 8.6% of the total market index, while the rest of the semiconductor sector as a group represents a record high of 19.7% of the market index's weightings. |
| UBER | Earlier in the year, OpenAI and their popular nemesis, Anthropic, moved their enterprise AI customers from a fixed paid subscription to a consumption-based model in which customers are charged closer to the true marginal cost of compute. The reaction has been vehemently negative with some customers reporting massive budget busting overruns like Uber which burned through its AI budget for all of 2026 in April. |
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