Connecting The Future
100% Upside in Plain Sight
TLDR: Today we initiate our fifth Krypton Research investment pick, rebuilding our book after two exits with RRX 0.00%↑ and ARM 0.00%↑ returning over 50% each. We take a look at a company that is quietly positioning itself to be the central nervous system of an automated future in manufacturing and beyond. After years of chop and lack of market interest, we see this firm entering a critical expansion phase… right as its theme is set to explode.
Its been a while.
We’ve taken a bit of a backseat in recent weeks, enjoying the massive returns from our ARM 0.00%↑ investment to the tune of nearly 118% at the peak of its recent squeeze.
Markets embarked on a major lockout rally for the entire month of April, but a lot of this was heavily concentrated in, what has become the norm, semiconductors.
Semis have been killing it.
And we aren’t complaining given our heavy exposure to ARM, but it feels about time to make a change in where we’re looking for alpha.
In our view, buying chips at these valuations is likely to yield underwhelming forward returns, outside of maybe some under appreciated names/angles such as analog (TXN) and spec power semi names (NVTS, etc..).
And when we say “lock out” rally…
We mean it.
That Nasdaq chart is absolutely brutal for those who were either heavily skewed to cash or (inexplicably) were short.
There hasn’t been a clean dip entry or pullback to previous highs at all, its rip after rip… thankfully we had told readers this throughout the March pullback:
“We see this conflict as the pulling back of a slingshot on U.S. markets, with any resolution sparking a relief rally that can send stocks to new highs entering April and into the busy Q1 earnings season after that.”
The slingshot came and went, and Q1 earnings season is well underway.
One thing is clear.
The AI trade is nowhere close to slowing down.
Hyperscalers raised capex guidance again, to no one’s surprise, and more importantly, AI has been finally showing clear returns:
Anthropic has exploded.
AI applications across the board have begun showing positive returns, and as we outlined months ago, the capex that is funding this whole flywheel is coming from highly profitable companies with more than enough FCF to continue sustainable investing.
This is all basically just to say… we are heading well higher. The government, and the new fed regime will be more than willing to let this economy run hot (higher inflation is ok in the short term, 3-4%, keep rates where they are and let the economy expand materially). Remember inflating away the current unsustainable levels of national debt is not the worst idea either.
You better own assets, and you better invest in what is rapidly becoming an exponentially closer future… don’t underestimate the power of change.
So what?
Well, it comes back to the theme that has powered our brilliant returns.
The ribbon that tied together both RRX and ARM within our portfolio.
Physical AI.
We saw RRX as the underrated play to gain exposure to robotics through its actuators, joints and physical mechanical instruments. The skeleton of these machines.
We saw ARM as the obvious play to power the brains of these machines.
So you have the skeleton, you have the brain… all you need now is to connect it all.
The nervous system.
