Investment Pitches

Pitch Summary:
We started a position in NVIDIA (NVDA) following a significant pullback in the stock. The decline was prompted by concerns stemming from the emergence of DeepSeek, an unknown Chinese AI software company, which unveiled a highly efficient large language model (LLM). DeepSeek's breakthrough raised investor fears that U.S. hyperscalers might reduce their capital expenditure plans due to a shift toward more resource-efficient AI models. This led to concerns over potential overcapacity in the AI infrastructure market, weighing heavily on NVDA's stock. As a result, NVDA shares declined nearly 30% from recent highs, presenting an attractive entry point. On our cost basis, NVDA was trading at approximately 25x expected 2025 earnings and 20x expected 2026 earnings, valuations we found compelling for a company projected to grow revenue and earnings by over 50% in calendar year 2025. We viewed this risk-reward profile as favorable, especially given NVIDIA's dominant position in powering the transition to accelerated computing architecture that powers the AI ecosystem. The AI market is still in its preliminary stages, characterized by fast-paced innovation, and evolving rapidly. While DeepSeek's advancement sparked a debate around capital efficiency, we believe it reinforces a broader trend we have seen in past technology cycles. Specifically, we view Jevons' paradox, where gains in efficiency lead to increased overall consumption, as highly relevant to AI. Supporting this view, U.S. hyperscalers increased their 2025 capital expenditure guidance during Q4 2024 earnings calls in January, despite being fully aware of DeepSeek's progress. Further, the integration of reasoning capabilities into leading LLMs, such as those used in ChatGPT, is significantly increasing computing intensity. Some experts estimate that inferencing models with reasoning can demand up to one hundred times more computing, reinforcing the idea that greater efficiency will not lessen, but rather increase, demand for NVIDIA's infrastructure. We are still mindful of the rapid evolution within the AI space from the emergence of more efficient models to the still-nascent monetization of AI software. Against this backdrop, we chose to start a focused position in NVDA while reducing exposure to other AI-related holdings such as Broadcom, Amphenol, and Oracle. In our view, NVIDIA offers an attractive way to take part in the generative AI buildout, combining scale, technological leadership, and a healthy growth outlook.

BSD Analysis:
Mar Vista initiated a position in NVIDIA following a 30% decline, viewing the DeepSeek-driven selloff as an attractive entry opportunity. The fund acquired shares at compelling valuations of 25x 2025 earnings and 20x 2026 earnings for a company expected to grow revenue and earnings over 50% in 2025. Mar Vista applies Jevons' paradox to AI, arguing that efficiency gains will increase rather than decrease overall computing demand. The integration of reasoning capabilities into large language models could require 100x more computing power, supporting continued infrastructure demand. Hyperscalers' increased 2025 capex guidance despite DeepSeek awareness validates this thesis. NVIDIA's dominant position in accelerated computing architecture provides sustainable competitive advantages in the AI ecosystem transition. The company's technological leadership, scale advantages, and comprehensive software stack create high switching costs for customers. Mar Vista views the AI market as still in preliminary stages with rapid innovation ahead. The focused position approach while trimming other AI holdings demonstrates conviction in NVIDIA's superior risk-reward profile. The fund sees NVIDIA as the best way to participate in generative AI buildout given its market leadership and growth outlook.

Pitch Summary:
Apple's stock came under pressure in Q1 due to concerns of softening iPhone demand; increased competition from Huawei in China; challenges with the rollout of Apple Intelligence, its new AI offering for the iPhone; and potential tariff-related headwinds. Despite these near-term challenges, we continue to view Apple as competitively advantaged, supported by the strength of its ecosystem, which includes a loyal customer base encompassing over 2 billion active devices and more than 1 billion paying subscribers. This ecosystem generates recurring service revenue and supports a stable cash flow stream, which enables Apple to invest in product development during cyclical slowdowns like its recent experience with soft iPhone sales. We believe these cyclical headwinds are transitory, and Apple is well-positioned to emerge from this period of softer iPhone demand as a leader in AI-enabled edge devices.

BSD Analysis:
Mar Vista maintains conviction in Apple despite near-term headwinds from iPhone demand softness, Chinese competition, and AI rollout challenges. The fund emphasizes Apple's ecosystem strength as a sustainable competitive advantage, with over 2 billion active devices and 1 billion paying subscribers creating powerful network effects. The recurring services revenue provides cash flow stability during hardware cycles, enabling continued R&D investment in next-generation products. Apple's loyal customer base demonstrates low switching costs and high lifetime value, supporting premium pricing power. The company's financial strength allows strategic investments during cyclical downturns, positioning it for the next growth phase. Mar Vista views current challenges as transitory rather than structural, with Apple well-positioned to lead the AI-enabled edge device market. The integration of Apple Intelligence across the device ecosystem could drive the next upgrade cycle. China competition from Huawei appears manageable given Apple's brand strength and ecosystem lock-in. The services business provides margin expansion opportunities and reduces hardware cyclicality over time.

Pitch Summary:
Alphabet's stock, currently trading around $150, carries the lowest valuation among the "Magnificent Seven" at just 16.6 times this year's earnings—a below-market multiple that suggests deep investor skepticism. The concerns are well-documented: AI-powered competition threatening Google Search, an ongoing antitrust battle, and ballooning capital expenditures, expected to rise 40% to $75 billion this year. We think most of the fear may already be priced into the stock price. Google still dominates search, holding nearly 80% market share, particularly in high-value commercial queries that drive its core advertising business. While AI innovations like ChatGPT and Perplexity AI present potential challenges, Google's integration of AI into search could help it keep leadership. Operationally, Alphabet is more disciplined than the market believes. The company is improving efficiency, with operating margins rising four percentage points in 2024. The appointment of CFO Anat Ashkenazi signals further cost-conscious execution ahead. Beyond search, Alphabet offers a diversified tech portfolio. YouTube is still a digital media powerhouse, Google Cloud is scaling toward profitability with $50 billion in annual sales, and Waymo is a frontrunner in autonomous driving. Meanwhile, Android continues to power the global mobile ecosystem. At 18 times earnings, Alphabet trades at a meaningful discount to peers, despite its robust cash flow and dominant market positions. With AI threats overstated and cost controls improving, current valuation is compelling.

BSD Analysis:
Mar Vista presents a compelling contrarian case for Alphabet, emphasizing the disconnect between valuation and fundamental strength. Trading at 16.6x earnings, the stock represents the cheapest valuation among mega-cap technology companies despite maintaining dominant market positions. The 80% search market share, particularly in high-value commercial queries, provides sustainable competitive advantages and pricing power. Management's operational discipline is evident in the 400 basis point operating margin improvement in 2024, with new CFO Anat Ashkenazi likely to drive further efficiency gains. The diversified portfolio beyond search includes YouTube's media dominance, Google Cloud's $50 billion revenue run-rate approaching profitability, and Waymo's autonomous driving leadership. Android's mobile ecosystem control provides strategic leverage across multiple business lines. The 40% capital expenditure increase to $75 billion reflects necessary AI infrastructure investments rather than wasteful spending. AI competition concerns appear overblown given Google's integration capabilities and search moat durability. The valuation discount to peers creates an attractive risk-reward profile for patient investors.

Pitch Summary:
We keep a positive outlook on Broadcom shares, despite recent stock price pressure stemming from two key concerns: (1) uncertainty around potential tariffs and the impact on global growth, and (2) investor skepticism on the return profile of large-scale AI capex investments by hyperscalers. This skepticism has been amplified by the efficiency gains recently shown by DeepSeek, an unknown Chinese software company, which developed a competitive large language model at a much lower cost. These efficiency gains stoked fears that hyperscalers may have overbuilt AI infrastructure. Broadcom keeps a strong competitive position in the custom AI ASIC market, as well as a disciplined capital allocation, most recently reflected in the VMWare acquisition. That deal is already delivering better-than-expected top-line growth and margin expansion. Broadcom is the leading provider of custom AI ASICs and has been steadily diversifying its customer base beyond its first anchor client, Alphabet. Many hyperscalers are interested in developing custom ASICs, which are tailored to specific computing tasks, given their lower costs and attractive performance attributes compared to general-purpose GPUs from providers like NVIDIA. While we are still constructive on Broadcom's long-term prospects, we did trim our position earlier in the quarter at higher levels to reallocate capital toward a more favorable risk-reward opportunity. Nonetheless, Broadcom is still a core holding in our portfolio and offers an attractive margin of safety. We believe the company is well-positioned to grow intrinsic value by +20% over the intermediate term.

BSD Analysis:
Mar Vista maintains a bullish long-term view on Broadcom despite near-term headwinds from tariff uncertainty and AI infrastructure skepticism. The fund emphasizes Broadcom's dominant position in custom AI ASICs, which offer superior cost and performance characteristics compared to general-purpose GPUs. The VMware acquisition demonstrates management's disciplined capital allocation, already delivering above-expected revenue growth and margin expansion. Customer diversification beyond Alphabet reduces concentration risk while expanding market opportunities. The DeepSeek efficiency concerns appear overblown given hyperscalers' continued interest in custom silicon solutions. Broadcom's competitive moat in complex semiconductor design and manufacturing creates high switching costs for customers. The company's software transformation through VMware provides recurring revenue streams and higher margins. Mar Vista's +20% intrinsic value growth target over the intermediate term reflects confidence in the AI infrastructure buildout and Broadcom's market leadership. The position trimming at higher levels demonstrates disciplined portfolio management while maintaining core conviction.

Pitch Summary:
Johnson & Johnson (JNJ) appreciated 16% as the market favored businesses with more defensive characteristics. JNJ also posted strong fundamental results in pharmaceutical (+7% revenue growth) ahead of Stelera biogeneric approvals in January 2025. We expect JNJ to grow revenues 5-7% through 2030 with faster EPS growth driven by new innovative immunology, oncology, and neurology drugs. JNJ's MedTech franchise should outpace the growth of the rest of the industry on the strength of new products in electrophysiology, orthopedics, and robotics.

BSD Analysis:
Mar Vista views Johnson & Johnson as a defensive quality play with strong growth prospects across its diversified healthcare portfolio. The 16% quarterly appreciation reflects market rotation toward defensive characteristics amid economic uncertainty. The pharmaceutical segment's 7% revenue growth ahead of Stelera biosimilar competition demonstrates pricing power and pipeline strength. Management's revenue guidance of 5-7% through 2030 appears conservative given the robust innovation pipeline in high-growth therapeutic areas. The immunology, oncology, and neurology franchises represent significant growth drivers with substantial market opportunities. The MedTech division's focus on electrophysiology, orthopedics, and robotics positions it to outgrow industry peers through technological innovation. Johnson & Johnson's diversified revenue streams, strong balance sheet, and consistent dividend growth provide downside protection. The company's R&D investments and regulatory expertise create sustainable competitive advantages in pharmaceutical development.

Pitch Summary:
TransDigm continues to post robust fundamental performance despite increased economic uncertainty and difficult year-over-year comparisons. Revenue grew 12% with strong contributions from commercial aftermarket and defense. These two segments are expected to deliver high single digit growth for the rest of the fiscal year. EBITDA as adjusted reached 52.9%, an industry prominent level. Management expects more EBITDA margin growth of up to 40 basis points for the rest of the year. Moreover, management telegraphed a special dividend and more capital deployment in the commercial aftermarket segment, which has historically led to incremental growth and margin expansion in future periods.

BSD Analysis:
Mar Vista expresses strong confidence in TransDigm's execution despite challenging market conditions. The company delivered impressive 12% revenue growth driven by commercial aftermarket and defense segments, both expected to maintain high single-digit growth trajectories. The standout metric is the 52.9% adjusted EBITDA margin, which represents industry-leading profitability. Management's guidance for additional 40 basis points of margin expansion demonstrates operational leverage and pricing power. The announced special dividend and increased capital deployment in commercial aftermarket reflects strong cash generation and disciplined capital allocation. TransDigm's aftermarket focus provides recurring revenue streams with high switching costs. The company's strategy of acquiring niche aerospace components with limited competition creates sustainable competitive advantages. Management's track record of margin expansion through operational improvements and strategic acquisitions supports the bullish thesis.

Pitch Summary:
Visa's stock appreciated 11% as secular trends in electronic payments are still steady despite macroeconomic uncertainty. Revenues should grow faster than overall consumer spending as electronic network penetration, cross-border travel, and new services help the company's top line. Visa's "toll taker" status should allow the business to thrive even in inflationary environments. We expect Visa to compound intrinsic value at low-mid teen rates in a variety of economic scenarios.

BSD Analysis:
Mar Vista maintains a bullish stance on Visa, highlighting the company's resilient business model amid macroeconomic uncertainty. The fund emphasizes Visa's "toll taker" positioning, which provides defensive characteristics and pricing power during inflationary periods. The manager expects revenue growth to outpace consumer spending due to continued electronic payment penetration, cross-border travel recovery, and new service offerings. The secular shift toward digital payments provides a long-term tailwind for the business. Mar Vista projects intrinsic value compounding at low-to-mid teen rates across various economic scenarios. The 11% quarterly appreciation reflects market recognition of these defensive qualities. Visa's network effects and dominant market position in payment processing create a sustainable competitive moat.

Pitch Summary:
Microsoft (MSFT) reported strong bookings, highlighted by an accelerating remaining performance obligation of nearly $300 billion, representing 36% year-over-year growth, as well as healthy cloud revenue growth of 21% year-over-year. Despite this solid performance, MSFT stock came under pressure as Azure revenue growth, at 31% year-over-year, came in at the low end of expectations. Additionally, guidance for the March quarter forecasted Azure revenue growth of 31% to 32%, reflecting a slowdown in non-AI-related Azure growth. We continue to believe Microsoft is well-positioned to gain market share as organizations of all sizes pivot toward a digital-first future and adopt generative AI solutions. With a strong presence in the enterprise and a comprehensive portfolio spanning infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), and software-as-a-service (SaaS), Microsoft is a mission-critical IT provider across industries. The company is executing effectively against a significant market opportunity by delivering a roadmap for digital transformation and the adoption of innovative AI tools like ChatGPT. This helps businesses boost productivity while reducing costs. Consequently, we expect Microsoft's solutions to remain resilient even in a challenging macroeconomic environment, supporting low double-digit intrinsic value growth over our investment horizon.

BSD Analysis:
Microsoft delivered strong fundamentals with $300 billion in remaining performance obligations growing 36% year-over-year and healthy 21% cloud revenue growth, though Azure's 31% growth disappointed at the low end of expectations. The company faces a slowdown in non-AI Azure growth, with guidance of 31-32% for the March quarter reflecting this trend. Despite near-term headwinds, Mar Vista remains bullish on Microsoft's positioning for the digital transformation and AI adoption cycle. The company's comprehensive cloud portfolio spanning IaaS, PaaS, and SaaS makes it a mission-critical IT provider across industries. Microsoft's integration of AI tools like ChatGPT into its platform creates productivity gains and cost reductions for enterprise customers. The fund believes this value proposition will drive market share gains as organizations pivot to digital-first strategies. Mar Vista expects Microsoft's diversified cloud platform and AI capabilities to prove resilient in challenging macro environments, supporting low double-digit intrinsic value growth over their investment horizon.

Pitch Summary:
Salesforce's (CRM) stock came under pressure in Q1 as investors grew concerned about the potential negative impact of trade tensions and tariffs on the global economy, as well as the current lack of monetization from AI-enabled software solutions. Despite these concerns, we remain confident in Salesforce's strong competitive position, deep customer relationships, and its ability to monetize AgentForce, its newly launched generative AI-enabled chatbot designed to automate customer service tasks and significantly reduce costs compared to traditional call center support solutions. As the largest provider of SaaS-based customer relationship management software globally, Salesforce possesses a vast repository of customer data. This data, when combined with generative AI solutions like AgentForce, can be mined for valuable insights and used to deliver enhanced customer outcomes. While AgentForce is still in its initial stages, it has already generated strong interest from both customers and global system integrators. Notably, Salesforce announced that approximately 5,000 customers are currently testing AgentForce, including around 3,000 paying customers. We continue to believe that Salesforce is well-positioned to monetize its AI offerings over time and expect the company to grow intrinsic value at a low double-digit rate.

BSD Analysis:
Salesforce faced pressure from trade tension concerns and skepticism about AI monetization, but Mar Vista remains confident in the company's competitive position and AI strategy. The fund highlights Salesforce's dominant position as the largest SaaS-based CRM provider globally, with deep customer relationships and vast data repositories. AgentForce, the company's generative AI chatbot for automating customer service, represents a significant cost reduction opportunity versus traditional call centers. Early traction is promising with 5,000 customers testing AgentForce, including 3,000 paying customers, demonstrating strong market interest from both customers and system integrators. Mar Vista believes Salesforce's combination of market-leading CRM platform and extensive customer data creates a powerful foundation for AI monetization. The fund expects the company to leverage its data advantage to deliver enhanced customer outcomes through AI-driven insights. Despite near-term headwinds, management projects low double-digit intrinsic value growth as AI offerings mature and gain broader adoption.

Pitch Summary:
Broadcom shares faced recent stock price pressure stemming from two key concerns: (1) uncertainty around potential tariffs and the impact on global growth, and (2) investor skepticism regarding the return profile of large-scale AI capex investments by hyperscalers. This skepticism has been amplified by the efficiency gains recently demonstrated by DeepSeek, an unknown Chinese software company, which developed a competitive large language model at a much lower cost. These efficiency gains stoked fears that hyperscalers may have overbuilt AI infrastructure. Broadcom maintains a strong competitive position in the custom AI ASIC market, as well as a disciplined capital allocation, most recently reflected in the VMWare acquisition. That deal is already delivering better-than-expected top-line growth and margin expansion. Broadcom is the leading provider of custom AI ASICs and has been steadily diversifying its customer base beyond its initial anchor client, Alphabet. Many hyperscalers are interested in developing custom ASICs, which are tailored to specific computing tasks, given their lower costs and attractive performance attributes relative to general-purpose GPUs from providers like NVIDIA. We did reduce our position earlier in the quarter at higher levels to reallocate capital toward a more favorable risk-reward opportunity.

BSD Analysis:
Broadcom faced pressure from tariff uncertainty and investor skepticism about AI capex returns, amplified by DeepSeek's efficient AI model raising overcapacity concerns. Despite these headwinds, Mar Vista highlights Broadcom's strong competitive position in custom AI ASICs and disciplined capital allocation exemplified by the VMware acquisition. The VMware deal is already exceeding expectations with better-than-expected revenue growth and margin expansion. Broadcom leads the custom AI ASIC market and has successfully diversified beyond its initial anchor client Alphabet. The company benefits from hyperscaler interest in custom ASICs, which offer lower costs and better performance than general-purpose GPUs for specific computing tasks. However, Mar Vista reduced their position at higher levels to reallocate capital to more attractive risk-reward opportunities. The fund maintains a positive view of Broadcom's competitive moat and execution capabilities despite near-term market concerns.

Pitch Summary:
We initiated a position in NVIDIA (NVDA) following a significant pullback in the stock. The decline was prompted by concerns stemming from the emergence of DeepSeek, an unknown Chinese AI software company, which unveiled a highly efficient large language model (LLM). DeepSeek's breakthrough raised investor fears that U.S. hyperscalers might reduce their capital expenditure plans due to a shift toward more resource-efficient AI models. This led to concerns over potential overcapacity in the AI infrastructure market, weighing heavily on NVDA's stock. As a result, NVDA shares declined nearly 30% from recent highs, presenting an attractive entry point. On our cost basis, NVDA was trading at approximately 25x expected 2025 earnings and 20x expected 2026 earnings, valuations we found compelling for a company projected to grow revenue and earnings by over 50% in calendar year 2025. We viewed this risk-reward profile as favorable, especially given NVIDIA's dominant position in powering the transition to accelerated computing architecture that powers the AI ecosystem. The AI market is still in its preliminary stages, characterized by fast-paced innovation, and evolving rapidly. While DeepSeek's advancement sparked a debate around capital efficiency, we believe it reinforces a broader trend we have seen in past technology cycles. Specifically, we view Jevons' paradox, where gains in efficiency lead to increased overall consumption, as highly relevant to AI. Supporting this view, U.S. hyperscalers increased their 2025 capital expenditure guidance during Q4 2024 earnings calls in January, despite being fully aware of DeepSeek's progress. Further, the integration of reasoning capabilities into leading LLMs, such as those used in ChatGPT, is significantly increasing computing intensity. Some experts estimate that inferencing models with reasoning can demand up to one hundred times more computing, reinforcing the idea that greater efficiency will not lessen, but rather increase, demand for NVIDIA's infrastructure. We remain mindful of the rapid evolution within the AI space from the emergence of more efficient models to the still-nascent monetization of AI software. Against this backdrop, we chose to initiate a focused position in NVDA while reducing exposure to other AI-related holdings. In our view, NVIDIA offers an attractive way to participate in the generative AI buildout, combining scale, technological leadership, and a healthy growth outlook.

BSD Analysis:
Mar Vista initiated a position in NVIDIA following a 30% decline from recent highs, triggered by concerns over DeepSeek's efficient AI model potentially reducing hyperscaler capex demand. The fund views the pullback as creating an attractive entry point at 25x 2025E and 20x 2026E earnings for a company expected to grow revenue and earnings over 50% in 2025. Management believes NVIDIA's dominant position in accelerated computing architecture for AI infrastructure remains intact despite efficiency concerns. They apply Jevons' paradox theory, arguing that AI efficiency gains will actually increase overall computing demand rather than reduce it. The thesis is supported by hyperscalers increasing 2025 capex guidance despite awareness of DeepSeek's progress, and the integration of reasoning capabilities requiring up to 100x more computing power. Mar Vista sees NVIDIA as the optimal way to participate in generative AI buildout given its scale, technological leadership, and growth outlook. The position represents a focused bet on AI infrastructure demand while reducing exposure to other AI-related holdings.

Pitch Summary:
Despite PepsiCo's stock trading at a modest discount to fair value, the absence of clear actions for immediate improvement in Frito-Lay's and carbonated soft drink (CSD) trends makes it challenging to foresee a narrowing of the valuation gap. While the business remains resilient, we recycled the capital into better opportunities within the portfolio. From a broader perspective, PepsiCo faces increasing fundamental pressures. The U.S. Department of Health's push for stricter regulations on artificial ingredients and carbonated soft drinks in schools adds to the already significant challenge posed by GLP-1-driven shifts in consumer behavior. While PepsiCo is better positioned than many peers to navigate the artificial ingredient issue, the lost beverage volume is unlikely to be recovered. This structural change creates a difficult financial outlook despite the company's strong brand portfolio. Our initial decision to trim our position a year ago at higher prices was based on these concerns, and today, the thesis appears even more challenging. While valuation and bearish sentiment provide some support, the main concern is intrinsic value growth. PepsiCo encounters challenges in reaching its ambitious 8-10% growth target over the next two years. These obstacles include the headwinds posed by GLP-1, regulatory risks, and the potential for product boycotts stemming from tariff-related tensions. The stock's value rose by 10% intra-quarter, partly due to the trend towards investing in defensive companies. Taking advantage of that staples' outperformance period, we decided to sell our investment.

BSD Analysis:
Mar Vista adopted a bearish stance on PepsiCo, completely liquidating the position due to structural headwinds and limited growth prospects. The manager identifies multiple challenges including GLP-1-driven consumer behavior shifts, regulatory pressures on artificial ingredients and school beverage sales, and potential tariff-related boycotts. Despite PepsiCo's resilient business model and strong brand portfolio, the company faces difficulty achieving its ambitious 8-10% growth target over the next two years. The lost beverage volume from regulatory changes and health trends is viewed as unlikely to be recovered, creating a challenging financial outlook. While the stock traded at a modest discount to fair value, the absence of clear improvement catalysts for Frito-Lay and carbonated soft drink trends limited upside potential. Mar Vista took advantage of defensive stock outperformance during the quarter to exit at favorable levels. The decision reflects concerns about intrinsic value growth rather than near-term valuation, emphasizing the structural nature of the challenges facing the business.

Pitch Summary:
We initiated a position in NVIDIA (NVDA) following a significant pullback in the stock. The decline was prompted by concerns stemming from the emergence of DeepSeek, an unknown Chinese AI software company, which unveiled a highly efficient large language model (LLM). DeepSeek's breakthrough raised investor fears that U.S. hyperscalers might reduce their capital expenditure plans due to a shift toward more resource-efficient AI models. This led to concerns over potential overcapacity in the AI infrastructure market, weighing heavily on NVDA's stock. As a result, NVDA shares declined nearly 30% from recent highs, presenting an attractive entry point. On our cost basis, NVDA was trading at approximately 25x expected 2025 earnings and 20x expected 2026 earnings, valuations we found compelling for a company projected to grow revenue and earnings by over 50% in calendar year 2025. We viewed this risk-reward profile as favorable, especially given NVIDIA's dominant position in powering the transition to accelerated computing architecture that powers the AI ecosystem. The AI market is still in its preliminary stages, characterized by fast-paced innovation, and evolving rapidly. While DeepSeek's advancement sparked a debate around capital efficiency, we believe it reinforces a broader trend we have seen in past technology cycles. Specifically, we view Jevons' paradox, where gains in efficiency lead to increased overall consumption, as highly relevant to AI. Supporting this view, U.S. hyperscalers increased their 2025 capital expenditure guidance during Q4 2024 earnings calls in January, despite being fully aware of DeepSeek's progress. Further, the integration of reasoning capabilities into leading LLMs, such as those used in ChatGPT, is significantly increasing computing intensity. Some experts estimate that inferencing models with reasoning can demand up to one hundred times more computing, reinforcing the idea that greater efficiency will not lessen, but rather increase, demand for NVIDIA's infrastructure. We remain mindful of the rapid evolution within the AI space from the emergence of more efficient models to the still-nascent monetization of AI software. Against this backdrop, we chose to initiate a focused position in NVDA while reducing exposure to other AI-related holdings such as Broadcom, Amphenol, and Oracle. In our view, NVIDIA offers an attractive way to participate in the generative AI buildout, combining scale, technological leadership, and a healthy growth outlook.

BSD Analysis:
Mar Vista initiated a position in NVIDIA following a significant pullback, viewing the DeepSeek-driven decline as an attractive entry opportunity. The manager emphasizes compelling valuations of 25x 2025 earnings and 20x 2026 earnings for a company projected to grow revenue and earnings over 50% in 2025. The thesis centers on NVIDIA's dominant position in accelerated computing architecture powering the AI ecosystem. Mar Vista applies Jevons' paradox to AI, arguing that efficiency gains will increase rather than decrease overall computing demand. The integration of reasoning capabilities into LLMs significantly increases computing intensity, with some models requiring 100x more computing power. Hyperscaler capex guidance increases despite DeepSeek awareness support the continued infrastructure demand thesis. The AI market remains in early stages with rapid innovation and evolving monetization models. NVIDIA's combination of scale, technological leadership, and growth outlook provides attractive exposure to the generative AI buildout. The focused position approach while reducing other AI holdings demonstrates conviction in NVIDIA's competitive positioning.

Pitch Summary:
Microsoft (MSFT) reported strong bookings, highlighted by an accelerating remaining performance obligation of nearly $300 billion, representing 36% year-over-year growth, as well as healthy cloud revenue growth of 21% year-over-year. Despite this solid performance, MSFT stock came under pressure as Azure revenue growth, at 31% year-over-year, came in at the low end of expectations. Additionally, guidance for the March quarter forecasted Azure revenue growth of 31% to 32%, reflecting a slowdown in non-AI-related Azure growth. We continue to believe Microsoft is well-positioned to gain market share as organizations of all sizes pivot toward a digital-first future and adopt generative AI solutions. With a strong presence in the enterprise and a comprehensive portfolio spanning infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), and software-as-a-service (SaaS), Microsoft is a mission-critical IT provider across industries. The company is executing effectively against a significant market opportunity by delivering a roadmap for digital transformation and the adoption of innovative AI tools like ChatGPT. This helps businesses boost productivity while reducing costs. Consequently, we expect Microsoft's solutions to remain resilient even in a challenging macroeconomic environment, supporting low double-digit intrinsic value growth over our investment horizon.

BSD Analysis:
Mar Vista maintains a bullish view on Microsoft despite near-term Azure growth concerns, emphasizing the company's strong fundamental performance and strategic positioning. The accelerating remaining performance obligation of $300 billion with 36% year-over-year growth demonstrates robust demand visibility and customer commitment. While Azure growth of 31% disappointed expectations, the manager views this as a temporary slowdown in non-AI workloads rather than a structural issue. Microsoft's comprehensive cloud portfolio spanning IaaS, PaaS, and SaaS positions the company as a mission-critical IT provider across industries. The integration of generative AI tools like ChatGPT creates significant productivity enhancement opportunities for enterprise customers. Mar Vista expects the digital transformation trend and AI adoption to drive market share gains across economic cycles. The projected low double-digit intrinsic value growth reflects confidence in Microsoft's execution capabilities and the durability of its competitive advantages in enterprise technology.

Pitch Summary:
Salesforce's (CRM) stock came under pressure in Q1 as investors grew concerned about the potential negative impact of trade tensions and tariffs on the global economy, as well as the current lack of monetization from AI-enabled software solutions. Despite these concerns, we remain confident in Salesforce's strong competitive position, deep customer relationships, and its ability to monetize AgentForce, its newly launched generative AI-enabled chatbot designed to automate customer service tasks and significantly reduce costs compared to traditional call center support solutions. As the largest provider of SaaS-based customer relationship management software globally, Salesforce possesses a vast repository of customer data. This data, when combined with generative AI solutions like AgentForce, can be mined for valuable insights and used to deliver enhanced customer outcomes. While AgentForce is still in its initial stages, it has already generated strong interest from both customers and global system integrators. Notably, Salesforce announced that approximately 5,000 customers are currently testing AgentForce, including around 3,000 paying customers. We continue to believe that Salesforce is well-positioned to monetize its AI offerings over time and expect the company to grow intrinsic value at a low double-digit rate.

BSD Analysis:
Mar Vista maintains a bullish stance on Salesforce despite near-term pressure from macroeconomic concerns and AI monetization skepticism. The manager emphasizes Salesforce's dominant position in CRM software and the strategic value of its extensive customer data repository. AgentForce represents a significant AI monetization opportunity, with early traction evidenced by 5,000 customers testing the platform and 3,000 paying customers. The generative AI-enabled chatbot addresses a clear customer pain point by automating customer service tasks and reducing costs compared to traditional call centers. Salesforce's deep customer relationships and market-leading position provide competitive advantages in AI adoption and monetization. The combination of proprietary customer data and AI capabilities creates opportunities for enhanced customer outcomes and pricing power. Mar Vista projects low double-digit intrinsic value growth, reflecting confidence in the company's ability to successfully monetize AI innovations over time.

Pitch Summary:
We maintain a positive outlook on Broadcom shares, despite recent stock price pressure stemming from two key concerns: (1) uncertainty around potential tariffs and the impact on global growth, and (2) investor skepticism regarding the return profile of large-scale AI capex investments by hyperscalers. This skepticism has been amplified by the efficiency gains recently demonstrated by DeepSeek, an unknown Chinese software company, which developed a competitive large language model at a much lower cost. These efficiency gains stoked fears that hyperscalers may have overbuilt AI infrastructure. Broadcom maintains a strong competitive position in the custom AI ASIC market, as well as a disciplined capital allocation, most recently reflected in the VMWare acquisition. That deal is already delivering better-than-expected top-line growth and margin expansion. Broadcom is the leading provider of custom AI ASICs and has been steadily diversifying its customer base beyond its initial anchor client, Alphabet. Many hyperscalers are interested in developing custom ASICs, which are tailored to specific computing tasks, given their lower costs and attractive performance attributes relative to general-purpose GPUs from providers like NVIDIA. While we remain constructive on Broadcom's long-term prospects, we did trim our position earlier in the quarter at higher levels to reallocate capital toward a more favorable risk-reward opportunity. Nonetheless, Broadcom remains a core holding in our portfolio and offers an attractive margin of safety. We believe the company is well-positioned to grow intrinsic value by +20% over the intermediate term.

BSD Analysis:
Mar Vista maintains a bullish long-term view on Broadcom despite near-term headwinds from tariff uncertainty and AI infrastructure skepticism. The manager emphasizes Broadcom's dominant position in custom AI ASICs, which offer superior cost and performance characteristics compared to general-purpose GPUs. Customer diversification beyond Alphabet reduces concentration risk while expanding the addressable market as more hyperscalers adopt custom silicon strategies. The VMware acquisition demonstrates disciplined capital allocation and is already exceeding expectations with strong revenue growth and margin expansion. Despite trimming the position for tactical reasons, Mar Vista maintains Broadcom as a core holding with an attractive margin of safety. The projected 20% intermediate-term intrinsic value growth reflects confidence in the company's competitive positioning and execution capabilities. The custom ASIC market opportunity remains compelling as hyperscalers seek more efficient computing solutions for specific AI workloads.

Pitch Summary:
Visa's stock appreciated 11% as secular trends in electronic payments remain steady despite macroeconomic uncertainty. Revenues should grow faster than overall consumer spending as electronic network penetration, cross-border travel, and new services benefit the company's top line. Visa's "toll taker" status should allow the business to thrive even in inflationary environments. We expect Visa to compound intrinsic value at low-mid teen rates in a variety of economic scenarios.

BSD Analysis:
Mar Vista maintains a strong bullish view on Visa, emphasizing the company's resilient business model and secular growth drivers. The manager highlights Visa's "toll taker" positioning in electronic payments, which provides defensive characteristics during economic uncertainty while capturing secular growth trends. Revenue growth is expected to outpace consumer spending due to continued electronic payment penetration, cross-border travel recovery, and expansion of new services. The business model's inflation-resistant characteristics allow Visa to maintain pricing power and margins across economic cycles. Mar Vista projects low-to-mid teen intrinsic value compounding, reflecting confidence in the durability of electronic payment trends. The combination of secular tailwinds and defensive characteristics positions Visa favorably across various economic scenarios. The 11% quarterly appreciation reflects market recognition of these fundamental strengths despite broader macroeconomic headwinds.

Pitch Summary:
Johnson & Johnson (JNJ) appreciated 16% as the market favored businesses with more defensive characteristics. JNJ also posted strong fundamental results in pharmaceutical (+7% revenue growth) ahead of Stelera biogeneric approvals in January 2025. We expect JNJ to grow revenues 5-7% through 2030 with faster EPS growth driven by new innovative immunology, oncology, and neurology drugs. JNJ's MedTech franchise should outpace the growth of the rest of the industry on the strength of new products in electrophysiology, orthopedics, and robotics.

BSD Analysis:
Mar Vista presents a compelling bull case for Johnson & Johnson based on both defensive characteristics and growth prospects. The manager highlights strong pharmaceutical performance with 7% revenue growth, demonstrating resilience ahead of biosimilar competition for Stelara. The projected 5-7% revenue growth through 2030 is supported by a robust pipeline in high-growth therapeutic areas including immunology, oncology, and neurology. The MedTech division is positioned to outperform industry growth through innovation in electrophysiology, orthopedics, and robotics. JNJ's defensive profile attracted investor interest during market volatility while maintaining strong fundamentals. The combination of steady pharmaceutical cash flows and higher-growth MedTech operations provides a balanced growth profile. Mar Vista expects faster EPS growth than revenue growth, indicating margin expansion and operational leverage from the innovation pipeline.

Pitch Summary:
Berkshire Hathaway appreciated 17% during the quarter fueled by solid underwriting results for the insurance platform and renewed investor interest in defensive businesses. Berkshire's cash balances expanded to $330 billion as of the end of the year with a notable reduction in its large Apple position. Berkshire's excess capital should allow the company to better navigate turbulent periods and make strategic investments at opportune times.

BSD Analysis:
Mar Vista maintains a bullish stance on Berkshire Hathaway, highlighting the company's strong operational performance and defensive characteristics. The manager emphasizes solid underwriting results from Berkshire's insurance operations, which form the core of the company's business model. The substantial cash position of $330 billion provides significant strategic flexibility and downside protection during market volatility. The reduction in Apple holdings demonstrates disciplined capital allocation and risk management. Berkshire's defensive business profile attracted renewed investor interest during the quarter's market turbulence. The excess capital positions the company to capitalize on strategic investment opportunities during market dislocations. Mar Vista views Berkshire as well-positioned to navigate challenging economic conditions while maintaining optionality for value-accretive investments.

Pitch Summary:
Sodexo is a food services and facilities management company. It is the third largest on-site food services company in the world, behind Compass Group and Aramark, serving corporate offices, schools, hospitals, and other venues. Food Service makes up roughly two thirds of their revenue, and approximately 50% of the total market for food services remains in-sourced. The remaining third of its revenue comes from Facilities Management, which includes outsourced cleaning, security, and building engineering and maintenance. There are many reasons we like Sodexo, including its strong balance sheet, stable revenues in both good economic times and bad, long-term customer contracts, and a solid customer retention rate of approximately 95%. The family of the founder, Pierre Bellon, owns 40% of shares and they have been good long-term owners. Over the last few years, the management team has been enhancing the business, resulting in improved margins, a higher customer retention rate, and stronger new business development. The company also spun out noncore businesses and has simplified its corporate structure.

BSD Analysis:
Vulcan purchased Sodexo, the world's third-largest on-site food services company serving corporate offices, schools, hospitals, and other venues. Food services comprise two-thirds of revenue, with significant growth opportunity as approximately 50% of the market remains in-sourced. The remaining third comes from facilities management including cleaning, security, and building maintenance. The manager highlights multiple attractive characteristics: strong balance sheet, stable revenues across economic cycles, long-term customer contracts, and impressive 95% customer retention rate. Founder Pierre Bellon's family owns 40% of shares and has demonstrated good long-term stewardship. Recent management initiatives have enhanced the business through improved margins, higher customer retention, and stronger new business development. The company has also simplified its structure by spinning out non-core businesses. Sodexo's defensive characteristics, secular outsourcing trends, and operational improvements position it well for consistent long-term growth.