Hot Takes from the Market: AI, Geopolitics, and Hidden Value for Investors - Dec 03, 2025

Here are some interesting takeaways from alternative content sources, incl. 30+ podcasts over Nov 28 - Dec 02, 2025.

Hot Takes from the Market: AI, Geopolitics, and Hidden Value

The past few days have been a whirlwind, with market discussions spanning from the intense AI arms race and geopolitical shifts to surprising pockets of value in seemingly overlooked sectors. Here's what's caught my eye:

1. AI: The Race Intensifies, But the Narrative is Shifting

The AI story is clearly moving into a new, more competitive phase, challenging the early "winner-take-all" assumptions.

• OpenAI's "Code Red": OpenAI, once the undisputed leader, has reportedly declared a "code red" to refocus on improving ChatGPT. This comes as Google's Gemini is gaining significant traction, with data showing users are spending more time per session on Gemini. This indicates a shift from "AI magic and disruption" (Year 1) to "math and scale" (Year 3), where incumbents with massive resources like Google (approaching $4 trillion market cap) are leveraging their hardware, cloud, and distribution to billions of users.
• The "Commoditization" of Models: AI is behaving more like a commodity, specializing and fragmenting rather than consolidating. The cost of intelligence is collapsing, with Chinese open-source models offering cheap, high-performance alternatives globally. This suggests the market might be more like the fragmented "cloud industry" (multiple winners) than "aircraft manufacturing" (winner-take-all).
• The Power Constraint Debate: The huge increase in electricity demand for AI is creating significant challenges for the US grid, with projections like Texas adding "California-sized" demand by 2030 deemed "impossible." Grid equipment (like transformers) has lead times of 3-4 years.
  • Debate: Who pays for these upgrades? Should hyperscalers pay tiered, higher rates, or will consumers bear the cost through higher bills? One expert suggests "bring your own generation" policies for data centers.
  • Contrarian Solution: Some experts believe the problem is solvable through policy innovations, such as market-based principles for grid allocation, or leveraging demand flexibility (e.g., smart thermostats).
• Apple's "Stealth Rally": Despite initial criticism for lacking a clear AI strategy, Apple shares are at all-time highs (market cap >$4.2 trillion). The contrarian view is that Apple's "different approach" (privacy-focused, on-device AI using proprietary chips) could be an advantage, positioning them as the primary "vehicle" for AI interaction for billions of users, often for free, avoiding the massive R&D spend of competitors.

AI Infrastructure as a Gold Rush: While the model race heats up, the underlying infrastructure is a massive play. Global power consumption is surging at its fastest pace in over a decade, with AI-driven data centers projected to contribute nearly a fifth of a trillion kilowatt-hours of annual demand growth through 2030. This requires an estimated $3 trillion investment in data centers by 2028, adding 126 gigawatts (equivalent to Canada's total power consumption).

Contrarian View: AI Needs Less Compute?

Klarna CEO Sebastian Semyakowski offers a fascinating counter-narrative, suggesting AI is the "most effective compression technology ever created." He posits that by removing data duplication, AI could eventually reduce the need for compute power, challenging the current "melting data center" narrative.

2. Geopolitical Shifts and Defense Innovation

Global tensions are not just abstract headlines; they're driving tangible shifts in defense spending and national priorities.

• Defense Disruption: Palmer Luckey (Oculus founder, now Anderol) is "disrupting the established order" in defense. Anderol's mission: build advanced tech for US/allies to deter conflict and win decisively. He attributes past success to engaging with conventional systems as an "out-of-the-box" person, exemplified by Anderol hiring "more lawyers and lobbyists than engineers" in its early months to shape institutional perception.
• Shift to "World Gun Store": The US role is shifting from "world police" to "world gun store," building and selling advanced arms to allies to deter invasion and win conflicts swiftly. This is seen as economically and strategically beneficial, maintaining shared interests without US boots on the ground.
• European Rearmament: Germany is actively preparing a "secret plan for war with Russia," expecting an attack by 2029. This involves mobilizing hundreds of thousands of NATO troops and addressing severe logistical hurdles due to degraded infrastructure. European defense firms are "scrambling" for vital components like rare earth minerals.
• China's Geopolitical Chess: China is leveraging its economic and technological power, exporting "autocratic technologies" (like AI camera systems for tracking dissidents) to African nations in exchange for loyalty, similar to the Soviet Union's AK-47 strategy.

3. Unloved Sectors & Investment Opportunities

Beyond the tech giants, shrewd investors are finding value in neglected or misunderstood areas.

• Public Real Estate: A Deep Value Play: The GICS real estate sector is "not loved," down ~20% since 2022 while the S&P is up 40%. John Khoury of Long Pond Capital highlights Sunbelt apartment REITs, industrial, and self-storage trading at 25-30% discounts to private market NAV (6.5-7% implied cap rates vs. 5-5.25% private). Supply is normalizing (starts down 60-70%), signaling an "inflection on the horizon."
• Asset-Light Hotels: Hotel management and franchise businesses (Hilton, Marriott, Hyatt) are preferred over asset-heavy hotel REITs. Hilton, for example, is a 4-bagger since its 2017 split from Park Hotels, which is down 30%. This transition from asset-heavy to asset-light creates interesting opportunities.
• Latin America on the Rise: Harris Kupperman is bullish on Latin America, particularly Brazil and Chile. He predicts a political shift to the right, a weaker dollar, and commodity tailwinds. He likes buying the "financial system" (e.g., Brazil's B3 stock exchange, trading at 13x earnings vs. global 20-40x) and low-cost agricultural exporters (Minerva, JBS). Chile's ETF (ECH) is up 40% YTD.
• Copper and Metals: Copper prices are in an uptrend, hitting July highs, driven by insatiable demand for the power grid, utilities, and AI build-out, amidst persistent supply-side issues. Freeport and Southern Copper are noted as beneficiaries. Silver hit a fresh all-time high today, with gold up >4% this week.
• Homebuilders & Consumer Discretionary: DR Horton (13.8x earnings, 50% first-time buyers) is a buy on "pent-up demand" and share buybacks. Dick's Sporting Goods' core business is "humming" (5.7% comps), with potential for a Foot Locker turnaround. Natera (women's health, $50B TAM) is a "great story for the long term" with 15% revenue growth.
• "Boring" Infrastructure: Lumen, with its vast fiber network, is positioned as the "backbone of the AI revolution," offering 8x faster data transfer between data centers. This "deep value" play in AI infrastructure is gaining traction, despite less hype than direct AI plays.

4. Monetary Policy & Consumer Behavior

The macro picture remains complex, with consumer psychology playing a surprisingly outsized role.

• Consumer Irrationality: Credit card interest rates average 23%, but most consumers are not rate-sensitive. Instead, they respond to aggressive marketing (AMEX spends $6B/year, more than Nike/Coke), leading to high operating costs for card issuers that are passed on. Personal lines of credit are often cheaper but less marketed.
• The Fed's Dilemma: The Fed is expected to cut rates soon, but the impact on consumers is debated. While mortgage rates influence big decisions, small rate changes have less effect on credit card users already paying 23%. This suggests traditional monetary policy transmission might be weaker than standard models assume.
• Housing Affordability: Mortgage rates are expected to end 2026 around 5.75%, improving affordability but still keeping it "under pressure." Transaction volumes are only forecast to grow 3%, and home price appreciation 2% in 2026. The "lock-in effect" from low prior mortgage rates is still strong.

5. Investment Philosophies & Lessons Learned

Seasoned investors share insights on navigating complex markets.

• Exploiting Asymmetry: John Khoury's Long Pond Capital focuses on identifying and exploiting asymmetry between intrinsic value and stock price, noting that "volatility and asymmetry tend to hang out together." They prioritize "speed with duration," allocating quickly during volatility with a 2-year IRR horizon.
• "Technical Terminator" Founders: Andreessen Horowitz Growth seeks founders who are "technical terminators" – starting technical and learning commercial acumen (e.g., Databricks, Figma founders).
• "Pull Businesses" are Magic: David George of a16z emphasizes finding "pull businesses" where "the market is demanding more of your product" (e.g., Roblox, Anderol). These tend to create the most special companies.
• The Power of Efficiency: Andrew Beer's systematic trend-following strategy (DBMF) has delivered 350 basis points of annual outperformance over a decade versus its index by focusing on efficiency and lower implementation costs, rather than trying to predict esoteric market movements. He suggests viewing CTAs as a "crystal ball" that signals big changes early.
• Portfolio Purges: Harris Kupperman advises periodic "portfolio purges" to combat biases and ensure fresh thinking, likening it to "puking" for a clearer mind.
• Trust Problems, Not Solutions: Palmer Luckey's advice: "trust people when they tell you what their problems are, but don't trust what they think the solution is."
• The "Grown Up" VC Industry: Venture capital is no longer a niche; it's a "real asset class" driving a quarter of S&P 500 market cap, requiring firms to act with institutional rigor and high performance standards.

Happy alpha hunting! - Distilla