A Value Investor’s Guide to Software Stocks

This episode is brought to you by Vanneck.

If your clients are asking about gold hitting new highs, the real question isn't about

how to own gold, but how to position for a broader real asset cycle.

Take a look at RACS, the Vanneck Real Assets ETF.

It's a one-stop shop that actively rotates across gold, commodities, energy, infrastructure

and natural resources, adapting as the macro-environment shifts.

Learn more at vanneck.com slash RAAX Street.

Listen for full fun disclosures at the end of today's episode.

Andthropic is valued at least at $380 billion in OpenAI, at least at $830 billion, meaning

even in those valuations, more than a trillion dollars of value it was created in the private

markets, away from the S&P 500, away from the Nasdaq 100.

Hello and welcome to the Baron Streetwise podcast.

I'm Jack Howe, and the voice you just heard, that's Gil Luria.

He's an analyst at DA Davidson who covers software, where stocks have been blown up.

Gil has recommendations for software companies looking to win back investors, and for investors

looking for software stocks that can bounce back.

First we'll say a few words about all birds.

And speaking of all birds, our own Jackson Cantrell or audio producers about to fly the

nest a second time, right?

We have to frame this properly for what are sure to be I rate listeners, because people

have gotten the wrong idea.

I've seen like in the comments, they say, you have to, you have to come up with more money

to make Jackson's deal, seven, eight, nine figures.

It doesn't matter.

Nine figures.

Yeah, you got to stop me from entering the transfer portal, but that's not really what's

happened here.

What's happening here is you're busy out west doing your thriving startup and out of

the goodness of your heart, you agreed to, you know, to help us out here in the, in the

interim with some episodes.

And maybe you might pop in again down the road here and there, right?

Is that fair to say?

Yeah, I'm not, not counting that out.

Okay, because if it's about the nine figures to help me out, I'll get out front down

in Midtown Manhattan with a sandwich board, and I'll, I'll do what I can.

You're not serious, right?

Because I could close up shop.

But let's, the startups, that's successful.

To the nine, how many, how many of those figures are after the decimal point?

You know, let's talk all birds.

Are you, all birds caught on not too far from where you are?

I mean, they caught on big in Silicon Valley, right?

Are you now or have you ever been an all birds wearer?

You know what?

I'm familiar, but I'm, I'm a creature of habits, so I don't, I don't like to do trends.

So what do you wear?

What's your brand?

What's your brand?

I just, I, I pretty much just wear like, uh, uh, sambas and these like, uh, puma sneakers.

Sambas are Adidas.

This is not a Brazilian dance shoe or something like that that you were into.

No, no, the soccer shoes, yeah.

Now I'm, uh, I've been a new balance guy.

We talked about that.

I was in when they weren't cool, then I got out and then they got cool and then I got

back in.

Now, now I'm, now I'm in and they're cool.

I think you're a little, a little trendier than I am.

For people who haven't heard and don't know why we're talking about this company, all

birds, there was a stock that had lost almost all of its value and that this past week

jumped five hundred eighty two percent.

This got pretty Mimi and her hurry.

Let me give you some context that Nike, Nike just had a twelve year low and I've heard

a lot of reasons for that.

And one of them people say is an identity crisis.

Some investors say it has strayed too far from performance sneakers into fashion.

Maybe that's a topic for down the road.

But then this fashion sneaker company, all birds announced this past week that it's leaving

the feet business all together and it's getting into quote, AI compute infrastructure

and that stock sword.

So maybe an identity crisis can pay off.

I don't know.

Maybe Nike's just having the wrong kind of one.

If you don't know what all birds are, picture, marino wool socks, you know how you hear

wool and you think, oh, it's going to be itchy and hot, but you put on marino wool socks

and they're surprisingly soft and breathable and you can wear them even in warm weather

and so on.

Then picture if you took those socks and you fashion souls for them from sugar cane

and then you call them eco friendly sneakers and they became a big hit in Silicon Valley,

a status symbol with the tech bros and then you took the company public in 2021 with a

market value that briefly topped four billion dollars.

I'm grossly oversimplifying the origin story of all birds.

I think there's tree fiber involved in there too.

This stock peaked on day one, which is really, I think that's not what you want.

Let's maybe you're doing the selling, but I don't think that's what you want.

There were never profits for the company and sales have collapsed and I can think of

a lot of reasons.

Making popular sneakers is hard to begin with and if you make a popular one, it's hard

to hold on to that core tech bro customer while expanding to regular people.

And also making sneakers from all natural materials, that's costly.

Big companies can come along and reproduce the all birds look and feel using stuff that

comes mostly from crude oil and they can do it with much better profit margins.

And crude oil is a natural material if you go back far enough.

I have made that argument myself about other things unsuccessfully.

Like when people say, you know, when they talk about animals and nature and they talk

about what the awful things the people did, where you could say, it's a closed system.

Planet Earth is a closed system and we're animals within that closed system.

Everything that we do is by definition natural.

It is in our nature.

It's just, you know, it might be awful, but it really like oil and coal and gas is solar

power.

If you go back far enough, this is reminding me of that show Yellowstone, there's someone

who's like a peda type, like a vegan type person, they go out and they say, this is

awful.

What you're doing, you know, raising beef out here and he's, he basically gives a lecture

like, how many animals do you think you kill when you till a field?

Like think about all the mice and the bugs and everything like that.

It's just a, it's just epic destruction.

And so, and he basically asks, how cute does an animal have to be before you care?

Which I'm not saying I'm on board with that philosophy.

I'm not saying I'm against it.

I'm just saying that's what it reminds me of.

I eat beef and carrots for the record.

Where was I Jackson?

All birds.

Well, yeah, natural fibers.

Right, right, right.

Well, so the business has not been a raging success.

And by this past Tuesday, the stock was down 99.6% from its debut.

The debut was back in 2021.

That is, that's not a performance to brag about.

Let's just say that the stock has been fantastic for generating offsets to your capital gains.

But a day later, after Wednesday's sixfold rise, the stock was down only 97.1%.

To quote LL Cool J in 1990s, Mama said, knock you out.

Don't call it a comeback.

I mean, the context is totally different here.

But really, do not call this a comeback.

I mean, the idea is not, it's not fully crazy in the sense that it's not without precedent.

There's a company called CoreWeave that did just this.

It pivoted from crypto to buying Nvidia chips and renting out computing power.

And that one was recently valued at $74 billion,

even though it's burning huge sums of cash each year.

All birds, that'll change its name to new bird AI as part of its makeover.

It was recently worth only around $125 million.

It gave back some of those gains.

So you could say that all birds looks cheap relative to CoreWeave,

but people are going to laugh at you if you do, including me,

unless you turn out to be right, and then I'll say I knew it all along.

Because even though this idea is not 100% crazy, it's at least 99.6% crazy.

All bird secured $50 million in funding for its chips adventure.

I know the people who don't work day in and day out with large numbers

think of $50 million as a lot of money.

And it is a lot of money if it were dropped into our laps.

But it is a drop in the bucket for the kind of thing we're talking about.

For example, CoreWeave is expected to have capital expenditures this year

of 635 times the amount that all bird raised.

But all we really want to know is what's next for the stock, right?

Don't pin that on me. That's up to what you do next.

If what happens next is this thing achieves critical mass meme status.

What I'm talking about there is like game stop levels of Reddit,

buzz and rocket ship emojis.

If that happens and the stock were to trade high enough for long enough,

then the new all bird AI could use a secondary stock offering.

In other words, sell more shares to the public and raise real amounts of cash.

And maybe then it would be perceived as a more serious AI player.

And maybe it would attract even more investment.

It's hard to tell in meme land because you enter this world where

it feels sometimes like the least probable thing to happen does happen.

So bet on the bet on the long shot.

But that for me is not really an investment strategy.

I would say for all bird to pull that off,

it would be the financial equivalent of achieving sustained flight

with a self administered pants hike.

If you're wondering whether that's possible,

I'll pause here to give you a chance to try it.

No, I'm just kidding. Don't try it.

Please. That's all I have to tell you about all bird for now.

We'll keep an eye on what happens next.

I want to see if any companies do the same thing.

I'm thinking about launching a company called turd bird

and raising $50 million to fund only AI pivots.

Remember those shoes will jacks and you don't remember them.

But back in the 90s, there was something called LA gear.

And they made shoes that light up.

The company's still around, but not the stock.

And it's too bad because that's a perfect company to pivot

into hyperscale cloud computing for model training

and inference workloads is at least 580% upside there.

I'm still confused.

What's like the all birds?

What's the angle here?

Like what's their expertise that I put in a question?

I reached out to the company for their comment.

I haven't heard back.

I don't know. I don't want to put words in their mouth.

Let me just read from their statement

because it did put out a statement about this.

Okay, they write new bird AI's long-term vision

is to become a fully integrated GPU as a service.

That's GPU as if I'm pronouncing that correctly.

An AI native cloud solutions provider.

Over time, the company intends to grow its NeoCloud platform

by expanding its compute and service offerings,

deepening partnership with operators and customers,

and evaluating strategic M&A opportunities.

So, you know, somewhere in those words,

I think of another way they could get their hands on money,

one thing core we have has done is you go to the companies

that you're buying the stuff from and you say,

hey, can you help us out with some money to buy the stuff?

I feel like we can do that.

Well, maybe we should get you a $20,000 microphone.

Confuses me about this is there's no rationale

for why they're the best positions

or best capable of executing such a strategy.

Like, I don't know if you remember in January,

there's an analyst who wrote about the Japanese toilet company

Toto being an AI play because it, you know,

makes these advanced ceramic parts that are special

for semiconductor chips and some part of that supply chain.

I'm hearing a lot of negativity here,

Jackson, a lot of skepticism.

That's not new bird AI thinking.

Okay, that's gloomy bird stuff.

Let's move on to software.

What do you say?

Sounds good.

Investing in software used to be, I think, so easy.

There was an episode of the HBO show Silicon Valley,

which is about a software startup.

And this episode aired almost exactly 11 years ago

and I quoted it recently in Berens.

There's a venture capitalist named Russ Haneman

and he scolds someone for thinking about profitability.

He says, it's not about how much you earn,

but what you're worth and who's worth the most

companies that lose money.

And I think that that was satire,

but it turns out if on the day that episode aired,

you were inspired by Russ's logic

and you put money into something called

eye shares, expanded tech software sector.

That's an exchange traded fund.

You made 278% over the following six years

and that was more than double the S&P 500's return.

This was a time when software stocks traded on

multiples of revenue and investors didn't always care much about profits.

They were talking about how software companies can scale

and stay asset light and how they're great returners.

And they were for a while,

but returns for the past five years have sunk

and that's especially following a 28% tumble

for that same ETF since the end of October.

There are basically two problems here,

maybe more, but let's focus on two.

One is that sometime after the COVID-19 pandemic,

as interest rates climbed from near zero

back to more ordinary levels,

investors decided that they were no longer

such fans of Russ's approach.

They like value in companies according to profits and cash flows

and not just revenue.

I mean, technically I'm mischaracterizing Russ's philosophy here.

People who are very familiar with that show

know that he dislike revenue too.

He said, if you show revenue,

people will ask how much and it will never be enough.

But I think you see what I'm saying here.

Investors became fuzz here.

The other more immediate problem is that investors have decided

that software companies will be victimized

by artificial intelligence.

And they are partly right about that

according to longtime industry analyst,

Gil Luria at DA Davidson.

I spoke with Gil recently about what these companies

have to do differently to win back stock buyers

and which stocks look likeliest to bounce back.

Let's hear some of that conversation now.

So what's interesting is that software is down

broadly, the broad index IGV is down 25%

and there's very few software companies

that are not down very significantly.

The ones that are down more are the ones

where the market has decided that their business

is most severely impaired by AI

and are most likely to suffer the consequences

of broader deployment of AI tools and AI agents.

So think of companies like call center software companies

nice and five nine or work automation companies

like UI path, work flow management companies

like Asana and Monday.

So those are the stocks that have been impacted the most.

But broadly speaking, there's been very few

software companies that have escaped the down draft.

You've been covering companies like this for a long time.

Tell me about the playbook, pre-chat GPT, let's call it.

What was the playbook for a company to be successful?

Keep investors happy, keep their stock going up.

What do they have to do?

Well, so just being a software company used to be great.

For good reason, software companies

have very highly recurring revenue

with very high incremental margins.

They're very asset light in general.

And so for several years, they did phenomenally well

and investors really measured them based on their growth,

sometimes rule of 40, which combine growth and profitability,

and even just quarter quarter how much they exceeded expectations.

Those were the key things.

And for a while there, for almost a decade,

these stocks traded on a revenue multiple.

So they didn't even really have to be that profitable

because they traded on a revenue multiple based on the fact

that they were growing very fast.

That's been changing over the last three years,

and it's changed abruptly over the last six months

when the market and investors concluded that

software companies would be at the forefront

of the adjustment to an economy that's dominated by AI.

And now we no longer have software companies

trading on revenue multiples.

They're being treated like any other stock, any other company,

so they're valued based on their profitability,

which is probably a healthy thing.

It balances the fact that there will be a lot of disruption from AI

with the fact that all those things that I said at the beginning are still true.

They're still very profitable fast growing companies

with high incremental margins and highly recurring revenue.

I can remember, and I'm sure you do too,

a widely read essay from a well-known investor

that software was eating the world.

And now here we are with a chip company,

a hardware company is the biggest company in America.

I guess that has been a big transformation,

but as you say,

these software companies are still making excellent money.

So what are they out there saying to investors,

perhaps unsuccessfully?

What are they trying to do right now to soothe investors' fears

and what might not be working for them at the moment?

Yes, so for the last couple of years,

the message from these software companies was,

we get AI, we're going to build AI products,

and those products are going to be very successful.

And a couple of years ago,

that message somewhat resonated with investors,

but recently it started falling on deaf ears,

because what investors are seeing that AI spend is actually going entirely

the software layer to Anthropic and Open AI.

So this whole notion that,

oh, all these package software companies

are going to build their own agents and sell AI upsells

is mostly being dismissed now by investors.

And so these are by the way,

privately held companies.

So if you're sitting there plunking part of your savings

into an S&P 500 fund,

that particular flow of cash isn't helping you.

Many of these other flows of cash toward hardware companies are,

but that particular one isn't really helping.

But that's right.

So if we were to think about where most of the valuation,

the value creation has happened,

it's in the chip companies, right?

In video Broadcom AMD,

Micron, in the US listed stocks.

But also, let's not forget that Anthropic is valued at least at 380 billion

in Open AI, at least at 830 billion,

meaning even in those valuations,

more than a trillion dollars of value

it was created in the private markets.

Away from the S&P 500, away from the Nasdaq 100,

most of the gains in the public markets

went to the chip companies, yes.

So what the companies have been telling their investors right now,

you say that's not working for them.

The investors don't want to hear these things right now.

What sort of things are they saying that are not working?

So say, oh, we have great AI products

and our customers are adopting them.

And we're going to get incremental growth from AI.

And we're winning in AI.

That message is not resonating with investors

because they know that the incremental dollars are actually going

to Anthropic and Open AI.

What we're suggesting is there's room for a different message,

which is we as a software company

are adapting ourselves to AI.

We understand that a lot of the agents are going to be made

by Anthropic and Open AI.

And we're going to help our customers

incorporate those agents into our product.

So our product is more useful to them.

They'll pay us more for the software,

maybe not as much as they're paying Anthropic and Open AI.

But they will be willing to pay us more,

which is a message I think investors would be far more open to

than this notion that these companies can compete successfully

with Open AI and Anthropic.

Thanks, Gil.

Gil has plenty more to tell us about software stocks,

including which ones investors should look at now.

Let's take a quick break and we'll be back with more of my conversation.

Over the past five years, old world assets

like Energy, Gold, and Infrastructure

have quietly outpaced equities,

raising questions about the traditional 60-40 portfolio.

Vanneck believes the drivers aren't going away.

AI build out reshoring and record government spending

are fueling a capex cycle that could last over a decade.

Rax, the Vanneck real assets ETF

gives investors active, diversified exposure

across all of it in one allocation.

It's built for this environment.

Check it out at vanneck.com slash RAAX Street.

Listen for full fun disclosures at the end of today's episode.

Welcome back, Jackson.

I have a bad habit.

Sometimes I'll ask a question that's like longer than the answer.

Sometimes I find myself monologuing

under the thin disguise of asking a question.

That's podcasting, baby.

I hope I didn't do that with Gil

because he had great information for us on software.

Or if I did it, I hope you edited me down and kept him.

You're just fine.

Thank you.

Let's leave it there.

All right, let's get back to software stocks.

Here's my conversation with Gil from DA Davidson.

Tell me if I've got this right.

You're saying that they should just basically acknowledge the state of the world,

acknowledge that all this money is flowing to these two big players and say,

hey, we're on board.

You want to work with the tools and the technology

these two players are producing.

We're going to find ways to facilitate that for you.

We're going to build that into what we're doing.

Is that the message that would work right now?

Exactly.

And then I would take it a step further and say,

look, if I'm a software company,

I have more costs on the code development software engineer side than any other company.

There's now the AI tools are the best at that.

So how about I as a software company take a look at my cost structure and say,

no, I can deliver a lot more growth with the same amount of head count or maybe even less head count.

There's an opportunity that software companies are actually in the best position

to benefit from the AI revolution because their costs are software development,

which can now be done 10 times more efficiently.

So you should be able to grow your profits faster than your costs.

You should be able to keep your maybe your head count flat,

maybe even maybe even trim your head count.

And that's what investors want to see.

You had a very specific thought on the message company send with their stock compensation.

Tell me about that.

So what we have in software land these days are some tourists, some value investors that have

never looked at software because software was not something value investors could look at because

if a software company was cheap even three years ago, it was because it was broken.

I feel like I know these tourists pretty well in their cheap, aren't they? They're pretty cheap.

That's right. They obviously want to see that money is being wisely spent.

So tell me, what do they need to do?

That's right. And they're used to looking at gap earnings in really almost any other sector.

And here they show up and they look at a software company because somebody told them that

this software company is trading at 15 times cash flow.

And then they look at the gap results and it tells them something completely different

that this company has very little profitability on a gap basis because much of it goes to stock-based

comp. In the gap earnings, you have to subtract for that, but it doesn't affect your cash coming

in and out the door. So your free cash flow still looks great. So and value investors don't like

that discrepancy. That's right. So what should companies do? So here's what we tell.

So first of all, we start with the fact that the reason we exclude stock-based

comp from our estimates for these software companies is because the gap accounting for

stock-based comp is actually very, very flawed. Gap accounting makes you expense every single

dollar of the stock award in spite of how this actually works. And how this actually works is

when I sign up a new employee into one of these software companies,

I usually give them the stock award on a five-year vest with a one-year cliff, which means they

don't really see any of the stock until they're at the company for two years. And then it gets,

they get a little bit more every year they stay after that. Well, turns out the typical software

employee works at a company for less than two years, meaning very little of this expense actually

is it happens out of the shareholders pocket. And in fact, there's a very easy way to see that.

If you look at the dilution in shares year over year for many of these companies, it's maybe one,

two, or three percent of actual dilution by the company issuing shares to its employees,

which is actually not as bad as saying, oh, 20, 25% of the revenue goes to stock-based comp.

So that's the discrepancy. That's what these value investors are learning,

wrapping their head around. But what we're saying to these companies now, to these software

companies is, look, you want these value investors, they're great investors, they're long-term investors,

they will help you succeed. Here's what you can do for them. The market for hiring software

engineers is much better for you than it ever has, because those jobs aren't as plentiful.

You don't have to give as much stock anymore. You could just have nice cash compensation. You

don't have to give a biggest stock an award, a stock award. In fact, you probably don't even have

to pay as much, because the market has softened so much from the employee standpoint. This is your

opportunity to make the most of this crisis, and tell your people, I'm not going to issue more stock,

tell people you're hiring, we're going to issue a lot less than we use to, and reduce that number,

make it easier for these value investors to get involved in your stock.

Gail, tell me about some names under your coverage that look like particularly good opportunities

now. Start if you could with any of these software companies that have really been beaten up.

Is there anything down a lot that suddenly looks tempting, where you think investors have

got it wrong, or they've overreacted, and then after that you can open it to anything else under

your coverage that you think is an especially good deal right now. Yeah, so many of them have been

beaten up so much that it's a target rich opportunity. So let me focus on a couple of categories.

One is companies that have an opportunity to accelerate growth for the bounce of the year.

There I'm talking about Microsoft, Oracle, Snowflake, DataDog. These are companies that are

very much riding the AI boom, have an opportunity to accelerate growth, and yet they're down significantly

because they have software in the name. So that's one really big opportunity, because that narrative

that these companies are suffering because of AI is going to go away pretty quickly when they

keep accelerating. That's one category. Another category is the category we just talked about,

which is companies that have an opportunity for a really big bottom line beat as they deploy AI

to cut their costs. And there we talk about some of the companies I mentioned. So Braze, Zeta,

Amplitude, DataDog, but beyond that as well, there's several companies that have a real opportunity

to beat a lot on the bottom line. And then I didn't also include a category of M&A targets.

One of the things that's happening right now is that you have strategic buyers that haven't

been buying for a while, or haven't been buying a lot for a while, and are now a little gun shy

because their valuation is low. But so are all their targets. For the first time, they can buy

companies at very attractive valuation. So if Salesforce used to buy companies at 20 times revenue,

it can now go out and buy companies at 20 times cash flow. That's much more creative. So we look

at their targets, and some of those are the same groups of Braze and Zeta, Clavio. But we also

look at targets in the infrastructure software as a place where the attractive valuations are

that much worthwhile. So you're looking at Dynatrice, J Frog, Elastic, GitLab. These are very

valuable companies now trading at pretty low cash low multiples with a lot of companies that

could benefit from owning that piece of the infrastructure. So a target rich environment,

because a lot of these valuations are attractive, but we're not broadly advocating for software,

not broadly advocating for the IGV, because that negative narrative of AI, it's not going away.

And so the run of the mill software company that just has decelerating growth and won't expand

margins and isn't for sale, may not do well this year. That's why we were focused on the ones that

are in one of those three categories. So big picture, if I understand you correctly,

this thing that investors believe about the harm that AI is going to cause some of these software

companies, they're right. There are plenty of companies that are going to be harmed by that

financially. It's just that there are some in the group that have traded down with the rest who

maybe don't deserve that or gotten too cheap. That's exactly right. And in that sense,

it's like any other technology disruption at the advent of the PC, of the internet, of mobile,

of cloud. Every time you have a major technology disruptions, well-positioned, well-managed

companies thrive and succeed and do better than ever, and companies that don't fit that criteria

fall by the wayside. It's the creative destruction that it makes technology so interesting and

software so interesting. Since you cover so many different types of companies, you must be looking

at this massive amount of spending right now on data centers and chips and everything else.

It just feels like so much of what directly impacts, let's say, the average Savers 401K is

hinging right now on this spending being sustainable. They're being a payoff for these

companies and companies being able to sustain this level of suspending. What do you think

when you look at the overall level of spending and investor expectations and Wall Street expectations,

do you think we're okay? Do you think that the money changing hands right now that we're going to

continue to see that type of activity for years to come? Overall, we're optimistic. There's a lot

of moving pieces in what you just said, but overall, we're optimistic. And here's why.

If you are using any of the most advanced tools, and we don't even have access to mythos yet,

but even if you're just using Opus or Cloud or the most recent iterations of OpenAI and Google

products, you can see how capable these tools are now. It's going to take time for them to get

diffused into the enterprise for us to have enough imagination to use them, but clearly they're

very powerful. So that's the first thing to point. The second thing is that OpenAI and Anthropic are

now at over a $50 billion annual run rate. That number was zero three years ago. It was almost zero

two years ago. And now it's over 50 billion. So that return that we want to get, we're starting to

get it. And I'll even point out that that 50 billion is severely under monetized that when Anthropic

and OpenAI actually start charging us for the value they're delivering and and put ads in chat

and price discriminate on some of the API access. Their revenue capacity is even higher than that.

So you look at the companies providing them compute, which is probably the most important

category. That's Microsoft Amazon Google and then some others. Of course, they're building more

data centers. They need to serve those two. They need to serve every other company that wants to use

AI. Most of the data centers they're building right now are pre-sold. So we do have the justification

right now. Those companies have the justification right now to continue to invest, to take their

operating cash flow and turn around and build new data centers because they're going to get very

good returns on that. So that should carry over into next year, which should address a lot of the

concerns people have about this build out. And then the last thing to consider on this is that

there's this race and notion that this may be a winner take all or winner take most market.

And there's at least five companies in the US that that are not willing to lose, right? So

if Microsoft Amazon Google met an Elon, none of them is willing to lose. They will continue to build

data centers because they want to be one of those one, two or three winners. And so we're going

to have that level of investment for a while. And then the last thing I'll point out on valuation is

if you look at the companies supplying those those data centers and their valuation, it's actually not

that high. You have a video trading at a market multiple, you have micron trading at single digit

earnings multiples. Now I understand that these are cyclical businesses, but we doesn't look like

where at the top of the cycle. So I would say overall, I'm optimistic. We need this capacity. It

is generating value. And in fact, we expect the value to diffuse to the rest of the economy over

the next few years. Thank you, Gil. And thank all of you for listening. Jackson Cantrell is our

audio producer. Jackson, is it back to the compost heap with you? Is it deep now? Do you get offended

when I generalize when I when I talk down? I know it's an industrial scale business and there's a

lot there's software and a lot of fancy things. But when I talk about it in terms of just banana

peels, does that, you don't mind a little composting, you know, well, we're thinking of pivoting from

banana peels to compute as a service. I like that idea. I like, well, no, actually, I like the idea

of the other direction. I think if you're out there doing startup compute as a service, maybe think

about the banana peels. I hear you're doing well with those peels out there. You can subscribe to

the podcast on how's it go? Apple and Spotify and wherever you listen, if you listen on Apple,

you can write a review and you can, what, you can email us a question. If you have a question,

you send it and it could be, we could answer it on the podcast, right? You just record your voice

on a voice memo on your phone and you send it to jack.how. That's h-o-u-g-h at barons.com.

Jackson, any last thoughts for us? Yeah, well, you can leave comments on Spotify too.

Those are timeless words. We did get people saying that they like your AI generated

nonsense songs. It's tempting to play us out with one of those, but yeah, you can't give them too

much. You got to leave them waiting for the next one. So when you come back to visit us,

you bring us an AI song, right? We'll do. See you soon, my friend, and see everyone next week.

What if the assets many investors ignored for years? Energy, gold, and infrastructure

could play a meaningful role in the next cycle. The assets building the future aren't all in tech.

Data centers need electricity. AI needs copper, reshoring needs steel, and gold is signaling that

the old rules about money, debt, and currency are shifting. Something Vannex real asset

steam has been highlighting for years. Rax, the Vannex real assets ETF is built for this environment.

It's an actively managed one-stop shop for real assets exposure, including gold, commodities,

natural resource equities, and infrastructure, adjusting as macro conditions evolve. Vannex

has been in real assets for 70 years. If you're looking to add inflation protection and real-world

diversification to a portfolio, Rax is worth a serious look. Visit vannex.com slash RAAX

street for the prospectus and full details. An investor should consider the investment objective

risks, charges, and expenses of the funds carefully before investing. To obtain a perspective

and summary perspectives which contain this and other information, visit vannex.com. Please read

the perspectives and summary perspectives carefully before investing. Rax is distributed by Vannex

security's corporation distributor.